Preamble

The House met at half-past Two o'clock

PRAYERS

[MR. SPEAKER in the Chair]

Oral Answers to Questions — DEFENCE

Aircraft Orders

Mr. David Nicholson: To ask the Secretary of State for Defence what aircraft have been ordered by his Department for the Royal Air Force since 1979.

The Minister of State for the Armed Forces (Mr. Archie Hamilton): With permission, Mr. Speaker, it would be appropriate before we answer questions, to ask the House to join us in expressing sadness at the deaths of two naval airmen in an aircraft accident yesterday at Portland and in extending to their families our deepest sympathy.
I refer my hon. Friend to table 5 of the "Statement on the Defence Estimates 1989", published last week, copies of which are available in the Library. He will note from that table that firm orders for a total of 550 RAF aircraft of eight different types have been placed since 1979.

Mr. Nicholson: As the first hon. Member to ask a question, may I strongly support my hon. Friend's first sentences. Obviously, flying the new aircraft, the orders for which we welcome, requires very rigorous training. Will my hon. Friend ensure that those pilots whose training involves low flights, which are particularly pronounced in my constituency, notably in Exmoor and west Somerset, are fully aware of the rules and regulations regarding low flying? Will my hon. Friend and his colleagues immediately look into any suggestion that the rules and regulations have been departed from?

Mr. Hamilton: Yes. I can assure my hon. Friend that any incidents of low flying which are brought to our attention in which people did not abide by the rules are rigorously investigated and everything is done to ensure that low flying is properly regulated.

Mr. Bill Walker: Does my hon. Friend agree that the Royal Air Force now has the best modern equipment of any time to meet the envisaged problems and that the aircraft which the Government have ordered do just that? Does he further agree that our aircrew are the most professional and highly trained in the western world? But there is no point in those two achievements if the aircraft —particularly strike aircraft—do not have modern stand-off capabilities otherwise they become very risky against sophisticated modern Soviet defences. Therefore it is essential that we have modern stand-off capabilities and we must upgrade those weapons systems.

Mr. Hamilton: My hon. Friend is absolutely right. That is why it is so important that our plans to replace the WE177 free-fall bomb with a tactical air-to-surface missile are so vital.

Mr. Rogers: On behalf of my right hon. and hon. Friends, I associate the Opposition with the sentiments expressed by the Minister to the families of those killed in yesterday's tragic accident. In view of his answer, which could be quite misleading, will the Minister say how many of the new aircraft have been put into storage because of inadequate radar, how many have been brought in simply as replacements after flying accidents, and how many have been put into full operational service with the RAF?

Mr. Hamilton: There are a number of aircraft which have been put into storage at the moment. That is because of the most economical form of production run. There were some aircraft in which the radars were not up to scratch, but now the radars are improving rather faster than the aircraft so many of the aircraft are being brought into service. There was a small problem but it has been overcome.

MOD Police

Mr. Skinner: To ask the Secretary of State for Defence what is his policy toward the deployment of members of the Ministry of Defence police on land outside his Department's responsibility.

The Parliamentary Under-Secretary of State for Defence Procurement (Mr. Tim Sainsbury): The deployment of members of the Ministry of Defence police is an operational matter for the chief constable, in accordance with the provisions of the Ministry of Defence Police Act 1987.

Mr. Skinner: Does the Minister recall that his hon. Friend the Minister of State for the Armed Forces said in Standing Committee on 12 February 1987 that Ministry of Defence police would be used only where defence interests were involved? If that is so, why were they used at Stonehenge? Will the Minister guarantee that the Ministry of Defence police will not be used against workers on strike, or is he in favour of secondary policing?

Mr. Sainsbury: Neither the hon. Gentleman nor myself were members of the Committee, although the record of its proceedings is in Hansard. If the hon. Gentleman had been a member of the Committee, he might have been more familiar with section 2 of the Ministry of Defence Police Act 1987. 1 draw his attention especially to subsection 2(2)(d), which makes clear the power of the Ministry of Defence police to operate outside Ministry of Defence land, including in support of a Home Office constabulary.

Mr. Key: My hon. Friend will be aware of my scepticism at the passage of that Act, in that it created for the first time a national police force under the direct control of a Minister of the Crown. However, the hon. Member for Bolsover (Mr. Skinner) is wrong in what he says. Will my hon. Friend accept that it is invaluable that the Ministry of Defence police help the civil police in disturbances that may arise, and in the protection of Stonehenge in my constituency? The delicate balance between the maintenance of the Queen's peace and the


upholding of the law is enhanced considerably by the devotion, dedication and professionalism of the Ministry of Defence police.

Mr. Sainsbury: I am sure that the whole House will be grateful to my hon. Friend for what he has said about the loyal and dedicated service given by the Ministry of Defence police. The chief constable of Wiltshire was grateful for the assistance rendered a year ago by the Ministry of Defence police in helping his force to maintain law and order and in protecting an important monument, in addition to the wellbeing of my hon. Friend's constituents.

Foulness and Maplin

Dr. Michael Clark: To ask the Secretary of State for Defence what plans or proposals he has for returning Foulness island and Maplin sands to civilian use.

The Parliamentary Under-Secretary of State for the Armed Forces (Mr. Michael Neubert): None, Sir. The use of Foulness island and Maplin sands is essential to the operation of the proof and experimental establishment at Shoeburyness. It makes a vital, impartial and cost-effective contribution to ensuring the safety and effectiveness of our weapons systems.

Dr. Clark: Is my hon. Friend aware that there are rumours in my constituency that a consortium is seeking to build a major international airport on Maplin sands? Will he confirm that he is not negotiating with that consortium, or any other, and that he has no intention or plans to do so at present?

Mr. Neubert: I am aware of the rumours circulating in my hon. Friend's constituency. Matters of airport policy are for our right hon. Friend the Secretary of State for Transport.

Nuclear Submarines (Accidents)

Mr. John Evans: To ask the Secretary of State for Defence what is the worst possible accident of a nuclear submarine in or near a British port for which his Department has emergency plans; and if he will make a statement.

Mr. Archie Hamilton: The nuclear accident plans of the Ministry of Defence are prepared in line with the recommendations of the International Commission on Radiological Protection. The reference accident, on which the plans are based, envisages the release of some radioactive fission products into the atmosphere. In accordance with the ICRP recommendations, the plans are designed to be flexible enough to apply in worse accidents. In addition to that, the Royal Navy regularly exercises some of these extremely improbable accidents. The plans also consider the possibility that the submarine could sink.

Mr. Evans: Yes, but will the Minister confirm that the worst possible accident that could occur to a nuclear submarine in port would be a primary containment failure, which would put many civilian lives at risk? Will he also confirm that local authority emergency planning officers have never been briefed about that probability and would have, therefore, no idea how to react if such an accident occurred?

Mr. Hamilton: It is probable in those circumstances that the submarine would burn and then sink. The radioactivity would be contained if the submarine sank, as water is the best substance for containing it.

Mr. Greg Knight: Is not the worst possible scenario an attack when we had a Government who were not prepared to press the firing button?

Mr. Hamilton: Yes, that is right. There is no point in having a nuclear deterrent unless one is prepared to use it. I am sure that the Soviet Union will have taken into account the fact that the Opposition are saying that they are not prepared to use it.

Dr. Reid: Is the Minister aware that on Sunday 7 May 1989 a vehicle allegedly transporting radioactive materials was involved in an accident at Cleland in my constituency? Can he confirm that there was radioactive material on board that vehicle? If so, will he confirm whether the vehicle bore the appropriate markings? Will he give a categorical assurance that the lives and personal safety of my constituents were not endangered? Will he now accept the unsuitability of that particular road between the two motorways for vehicles carrying hazardous substances and order a full investigation into why it was there in the first place?

Mr. Hamilton: I am grateful to the hon. Gentleman for having given me notice of his supplementary question. understand that, on a journey from Derby to the naval dockyard at Rosyth on Sunday, a contractors' lorry carrying a portable cabin belonging to Rolls-Royce and associates was involved in a minor accident on the road to Cleland, Lanarkshire. The cabin was one used in the non-destructive examination of plant and equipment. Police took precautions on learning that, although there were no radioactive sources within the cabin, it carried an aluminium container and a roll of plythene properly marked with warning tapes, which both held items which were mildly contaminated with radioactivity through having been used in test procedures. Anyone would have been able to pick up and handle the items without coming to any harm. Once the lorry's load had been re-adjusted the lorry continued on its journey to Rosyth.

Nuclear Weapons

Mr. Pike: To ask the Secretary of State for Defence what are the most recent proposals for new nuclear artillery shells.

The Secretary of State for Defence (Mr. George Younger): SACEUR's latest nuclear weapons requirement study addresses the full spectrum of NATO's nuclear requirements, including the need to continue with the modernisation of NATO's nuclear artillery shells.

Mr. Pike: The Secretary of State will know that Chancellor Kohl has called for equal ceilings for nuclear artillery shells at drastically reduced levels. Does not that conflict with the policy of the United States Government to modernise and to develop new nuclear shells that are capable of being turned into neutron bombs? Will the Secretary of State argue that the new shells should not be deployed in Europe?

Mr. Younger: I do not know whether the hon. Gentleman is familiar with SACEUR's nuclear weapons


requirement study. The proposals in it include a very large net reduction in the number of nuclear warheads. That compares with the fact that NATO has reduced its nuclear warheads by no less than 2,400 in recent years, whereas the Soviet Union has made practically no reduction. It is well open to the Soviet Union to make reductions if it so wishes.

Mr. Janman: Can my right hon. Friend predict what the effect would be on his Department's ability to defend the country, on the morale of the armed forces and on the nation's security, if the Labour party's policies on defence were implemented?

Mr. Younger: That is extremely difficult to predict, but it is certainly true that any policy that tried to throw over the policy of nuclear deterrence, which is supported by all countries in NATO, would be quite disastrous for the safety and security of this country.

Mr. James Lamond: In answer to my hon. Friend the Member for Burnley (Mr. Pike) the Secretary of State mentioned 2.400 warheads. Is the right hon. Gentleman aware that when I mentioned the subject to the Prime Minister at Question Time, she dismissed it as nothing at all—just a small reduction by NATO? Will the right hon. Gentleman have a word with the Prime Minister and tell her which story they should go forward with?

Mr. Younger: I am not sure what point the hon. Gentleman is trying to make. The Prime Minister has often referred to those figures, as have I. The hon. Gentleman must face the fact that the policy of nuclear deterrence is supported by all members of NATO without exception —including all those with Socialist Governments. The Labour party is in danger of getting out of step with all of them.

Mr. Sayeed: Will my right hon. Friend remind the House of the balance of nuclear-capable artillery between Soviet and NATO forces?

Mr. Younger: I shall be glad to remind the House of the modernisation that has been taking place. For instance, the Soviet Union has modernised 95 per cent.—almost all —its short-range nuclear missile systems in the past five years. It has replaced Frog missiles with the more capable SS21s and it is deploying the AS16 missile, which is a tactical air-to-surface missile. Labour Members who are supposed to be considering these matters should be a bit realistic about what is going on in the world.

Nuclear Tests (Compensation)

Mr. Hinchliffe: To ask the Secretary of State for Defence if he will review his policy on compensation for veterans of British nuclear tests.

Mr. Sainsbury: The policy of my Department is to pay appropriate compensation wherever the Crown's legal liability is established. Since there is no firm evidence to show that the health of British test veterans was affected by exposure to radiation during the United Kingdom's nuclear test programme, the Government remain of the view that the Crown cannot be held legally liable for any ill-health suffered by those who participated. We do, of course, have the greatest sympathy with those who suffer illness and who believe, quite sincerely, that this is due to

their participation in the nuclear test programme. However, in the circumstances, we see no reason to change our policy on the question of compensation.

Mr. Hinchliffe: As the Australian Government are paying compensation to certain veterans as a result of their involvement in a nuclear test, and the United States Government are paying compensation for 13 forms of cancer contracted by personnel involved in nuclear tests, is it not especially mean and insensitive for the British Government not to consider compensation for British service personnel who have been involved in the same tests? Will the Government consider the appointment of an ombudsman independently to analyse those compensation claims?

Mr. Sainsbury: I am sure that the hon. Gentleman will have studied the National Radiological Protection Board, report, which was independent and authoritative. I am sure that he will have due regard to its findings.
I understand that the terms of the judgment of the Australian court were published in Australia only last Thursday, although judgment was given rather earlier. A copy of the terms of that judgment was received by my Department only yesterday, so we have not had time to study its contents. I cannot yet say whether it will have any relevance or give us any cause for reassessing our position.

Mr. Sumberg: Does my hon. Friend agree that, however generous the compensation, none would be sufficient to compensate for the loss of life and freedom that would be engendered by this country adopting the foolish and ill-considered policies of the Opposition? [Interruption.]

Mr. Speaker: Order. I remind the House that the same rules apply here as in Prime Minister's questions. Questions must relate to Government responsibility.

Mr. Sainsbury: My hon. Friend draws attention to the fact that over the years members of our armed forces have been prepared to give very loyal service and to suffer injury and death to protect their country. We have drawn attention—[Interruption.]

Mr. Speaker: Order.

Mr. Sainsbury: I am seeking to reply to the point raised by my hon. Friend. I re-emphasise that it has always been the policy of my Department to give compensation where liability has been established. We also have a system of pensions for those who have been injured or for the dependants of those who have lost their lives in service to their country.

Mr. Boyes: That was a most disappointing and insensitive series of replies. It is unacceptable that the Minister is not offering compensation to nuclear test veterans. Will he, however, assure the House that he will consider giving compensation to those other nuclear veterans, the submariners, who have been discovered to have contracted cancer because of their service in nuclear submarines? Today the Minister's replies are nothing less than complacent, dilatory and lacking in care. It is about time that the Minister gave the House a guarantee that the Government will do something for those people who have suffered because of nuclear tests or their service in nuclear submarines.

Mr. Sainsbury: I hope that the hon. Gentleman, speaking as he does from the Front Bench, will have regard to the importance of being fair to all people involved and not just to those who are suffering from cancer, which they believe may have been caused by their participation in nuclear tests. As cause or connection was not established by the NRPB study, we have a responsibility to be fair to everybody—those who are suffering from cancers, who were not involved in nuclear tests, and those who were.
As is not unusual, the hon. Gentleman has gone off rather ahead of any factual information. The study to which he referred has been in progress for some time, and it is a study to check the general health of submariners. The hon. Gentleman should be aware of the fact that, if one is beneath the sea, one is protected from the nuclear radiation that all the rest of us are exposed to as we go about our normal business.

Nuclear Weapons

Mr. Eastham: To ask the Secretary of State for Defence what representations he has received from his Belgian counterpart about Her Majesty's Government's policy towards the modernisation of short-range nuclear weapons.

Mr. Younger: In recent weeks my Belgian colleague and I have discussed the question of modernising NATO's short-range nuclear weapons both bilaterally and at a meeting of NATO's nuclear planning group. The NPG communiqué, to which we both subscribed, reflects a large measure of agreement on essentials.

Mr. Eastham: Is it not a fact that the Belgian Prime Minister, Mr. Wilfried Martens, has been pressing the Government and other NATO countries for earnest East-West discussions about reductions in nuclear short-range forces? Why are the Government continuing the arms race philosophy, being so hard-line and causing such disagreement nowadays in NATO, such that the British Government seem to be the only Government who want to perpetuate the arms race?

Mr. Younger: The hon. Gentleman is not fair to the Belgian Government because all along the Belgian Government have supported the main NATO strategy of nuclear deterrence and have strongly said that they do not favour a third zero of the shorter-range nuclear forces. They agree that weapons systems must be kept up to date. We must be fair to the Belgian Government.
I wish to make it quite clear that the British Government consider the policy of nuclear deterrence, in which the shorter-range nuclear weapons play an important part, as a key factor in preventing war. It is to prevent all war that all our policy is directed and it has been successful over the past 40 years.

Mr. Devlin: Will my right hon. Friend take time during his next discussions with the Belgian Defence Minister to assure him that this Government will stand firmly behind the NATO strategy of nuclear deterrence, will ensure that proper conventional forces are supplied into the future for NATO's deployment and will ensure that we shall never let our allies down by backing out of NATO or even discussing such a possibility?

Mr. Younger: Yes, I agree with my hon. Friend and I re-affirm definitely that we in this Government entirely support the prevention of war by nuclear deterrence. In that we are supported absolutely unanimously by all our NATO allies of all political persuasions. All hon. Members, especially those in the Labour party, should reflect on that carefully at this time.

Mr. Alex Carlile: Does the right hon. Gentleman support President Bush in his new policy of re-integration towards the Soviet Union? Does he accept that that signifies that United States is moving towards the Kohl-Genscher view on the modernisation of nuclear weapons? Will he take steps to advise the Prime Minister to moderate her views before President Bush moderates them for her?

Mr. Younger: I fully support what the United States has been saying on these subjects in recent weeks under its new Administration. Its words are absolutely in line with those of myself and my right hon. Friend the Prime Minister.

Mr. Leigh: Would my right hon. Friend retain any credibility with his Belgian counterpart if he supported the modernisation of short-range nuclear weapons on the basis that he doubted whether they were any use at all, that he would never use them anyway, and that he would phase them out by the year 2000? Would not even the Belgians think that my right hon. Friend was guilty of fudge and mudge?

Mr. Younger: I am grateful to my hon. Friend. I cannot think of anyone in any of the other member states of NATO who would agree that the possession of a deterrent that one says that one would never use is of any use whatever.

Mr. O'Neill: Will the Secretary of State say which members of NATO support the Government's position on modernisation because not even the United States is prepared to go along with that and is itself seeking a compromise with the Federal Republic of Germany?

Mr. Younger: In answering that, I cannot do better than to quote from the NATO communique, to which all members of the Alliance subscribe—

Mr. O'Neill: Not completely.

Mr. Younger: Including my Belgian colleague. The words that he subscribed to are:
For the foreseeable future our strategy of deterrence will continue to require both conventional and nuclear forces. At this meeting we again expressed our determination to ensure that NATO possesses diversified, survivable and operationally flexible nuclear forces across the entire spectrum. These forces must be kept up-to-date where necessary.
That is a complete answer to the hon. Gentleman and to his party while it is trying to work out its future policy.

Soviet Air Force

Mr. Mans: To ask the Secretary of State for Defence what information he has as to whether the Soviet Air Force has reduced its offensive capability.

Mr. Archie Hamilton: We have no evidece to indicate that the Soviet air force has reduced its offensive capability; indeed there are signs that this capability has continued to grow. My hon. Friend will find this aspect covered more fully in the 1989 defence White Paper.

Mr. Mans: I thank my hon. Friend for that answer. Does he agree that it shows the need constantly to update our own Air Force equipment and to be prepared, if necessary, to use that equipment, which the Labour party's policy does not recognise? That is the only way to ensure that we can negotiate arms reductions from a position of strength rather than weakness.

Mr. Hamilton: That is absolutely true. The Soviet Union is producing 600 new fighters every year and 40 to 45 heavy and medium bombers. Those are becoming increasingly better equipped and, as my right hon. Friend the Secretary of State said, the Soviets have a good tactical air-to-surface missile which, I am quite convinced, is more sophisticated than our free-fall nuclear bomb.

Mr. Watts: Does my hon. Friend agree that his assessment of the offensive capability of the Soviet air force would be affected if President Gorbachev had given an undertaking never to make use of that offensive capability?

Mr. Hamilton: That is right. We are still awaiting such a pronouncement from President Gorbachev that he is not prepared to use armaments. His existence as president of the Soviet Union would be short-lived if he made such an announcement.

Burden Sharing

Mr. Clay: To ask the Secretary of State for Defence how the latest United States plans for burden sharing will affect United Kingdom defence costs and commitments.

Mr. Hamilton: The defence planning committee report published in December 1988, on the sharing of roles, risks and responsibilities within the Alliance acknowledges the United Kingdom's substantial and comprehensive commitment to the Alliance. However, it calls on us to continue efforts to achieve greater efficiency and value for money from the existing resources we commit to defence and to improve the real value of our defence budget. We fully accept this NATO challenge.

Mr. Clay: Will the Minister give an undertaking that one form of burden sharing that the Government will not go in for will be to accept in this country the American short-range modernised nuclear weapons which the west Germans had the good sense to refuse in their country?

Mr. Hamilton: The question of the follow-on to Lance being based in this country does not arise. We will, of course, review whether tactical air-to-surface missiles and dual-capable aircraft are based in this country.

Mr. Thorne: While I accept the need to ensure that everyone carries a fair burden in NATO, will my hon. Friend remind our American allies that it is also important that burden sharing in the far east is encouraged? The Japanese, by their actions, have been forced severely to reduce their contribution in the years since the war. That has been a major contribution to the fact that the Japanese are able to take us on in the industrial world. Would it not be better to ensure that the Japanese also make a fair contribution?

Mr. Hamilton: I know that our friends in the United States are concerned about the contribution made by the Japanese to the defence effort in the far east, and that is certainly something which we are discussing with them.

Mr. Cryer: Would it not be fairer if we reduced the level of our defence expenditure as a percentage of GDP to the average of our NATO allies? That would release some facilities that we could put into manufacturing industry, and so move towards the level of GDP percentage spending achieved by the Japanese Government, which is less than 1 per cent. We might then be able to emulate the success in manufacturing industry achieved worldwide by the Japanese.

Mr. Hamilton: I believe that the Japanese contribution to defence spending is in excess of 1 per cent. and, because its economy is so large, it is one of the biggest defence budgets in the world. We have a defence budget that meets our commitments and we should not reduce it below that level. We have made an enormous contribution to British industry and our defence exports are one of the finest parts of our overall export performance.

NATO

Mr. Ian Taylor: To ask the Secretary of State for Defence what plans he has to meet the Secretary of Defence of the United States of America to discuss the case for improving upon existing levels of defence efforts among west European NATO partners.

Mr. Younger: I expect to meet the United States Secretary for Defence, along with other Alliance Defence Ministers, at the NATO defence planning committee in Brussels next month. We shall discuss a wide range of issues, including the sharing of roles, risks and responsibilities within the Alliance.

Mr. Taylor: At that meeting, will my right hon. Friend draw attention to the fact that six members of NATO commit less than 3 per cent. of their GDP to defence spending, which puts increased pressure, particularly on Great Britain and America, to ensure that NATO's defences are steadfast and sufficient? Will my right hon. Friend also confirm that no Government in NATO have refused to pledge themselves to a proper policy of deterrence and the use of such a policy when circumstances require it? Therefore, the present British Government must continue in power to prevent any party from replacing that policy.

Mr. Younger: I agree with my hon. Friend's first point. It is very important that in an Alliance of equal, free, democratic nations all should pull their weight in the common defence. We certainly want to make sure that we play our full part and that we encourage all our allies to do the same.
Not only has the policy of deterrence been inordinately successful over many years now, but it is pointless to have a deterrent that one says in advance one is not prepared to use. The Government's policy is clear: the best way of preventing all war is nuclear deterrence.

Sir Antony Buck: When my right hon. Friend meets the United States Secretary of Defence, will he express to him the gratitude felt by most people in this country for the fact that the United States maintains such a substantial


commitment for the defence of Europe and that 100,000 of "their boys" are in Europe largely in our defence, as well as theirs?

Mr. Younger: I agree. The American contribution to NATO's common defence efforts is notable and welcome. It is worth adding that it was put in train by the American Government precisely because they understand that the defence of the United States of America starts in Europe. That is why they put their weight into it.

Armoured Vehicles

Mr. Andrew Mitchell: To ask the Secretary of State for Defence what armoured vehicles have been ordered by his Department for the Army since 1979.

Mr. Sainsbury: Since 1979, the Ministry of Defence has ordered seven regiments of Challenger 1 main battle tanks; 13 battalions of Warrior; 10 battalions of Saxon and a range of other type of armoured artillery, air defence and support vehicles.
Further details of these and other orders are contained in table 5 and paragraphs 327 and 328 of the "Statement on the Defence Estimates 1989".

Mr. Mitchell: Does not the excellent record that my hon. Friend has just outlined demonstrate both the quantity and the quality of the equipment with which we provide the armoured corps within the Army? Does it not also underline the strength and commitment of the Government to the deterrent effect of our conventional forces?

Mr. Sainsbury: I agree entirely. Of course, it also highlights the importance of keeping weapons systems up to date, whether conventional or nuclear.

Mr. Haynes: Not many moments ago a Minister agreed at the Dispatch Box with the use of Ministry of Defence police to support the civil police with problems. Bearing in mind the Secretary of State's majority at the last election, would he press the button to use the vehicles mentioned in the question against British people if he thought that was necessary?

Mr. Sainsbury: I must confess that I am not readily able to determine my ministerial responsibility for my right hon. Friend's majority, but I shall do all I can to increase it next time.
The Ministry of Defence police, whose operational tasks are under the control of their chief constable, would come to the aid of a Home Office force only at the request of its chief constable.

Mr. Speaker: The main question is about armoured vehicles.

Mr. Conway: Does my hon. Friend agree that as 50 per cent. of 1 BR corps is supplied by the Territorial Army there is a strong case for ensuring that the Territorial Army battalions designated to NATO have armoured personnel carriers at their disposal? Will he acknowledge that as these vehicles are manufactured so ably in Shropshire—and the engines even more so in Shrewsbury —I have no great personal interest to declare?

Mr. Sainsbury: As my hon. Friend is well aware from his knowledge and experience, these new armoured personnel carriers are a great deal more capable and

provide a great deal more protection than the vehicles that they replace. As he also knows, the battalions of Saxon are largely going to equip units that did not have armoured protection before, so, again, we are considerably increasing our capability.

NATO

Mr. Wray: To ask the Secretary of State for Defence if he will make a statement on the outcome of the recent NATO nuclear planning group meeting.

Mr. Younger: At the nuclear planning group meeting on 19 and 20 April, Ministers reaffirmed their determination to ensure that NATO has effective and up-to-date nuclear forces across the full spectrum of ranges, and expressed their continued support for national efforts to meet modernisation requirements stemming from Montebello. Ministers also noted SACEUR's conclusions about the link between modernisation and stockpile reductions and about the contribution to deterrence of new longer-range, ground-launched and air-delivered weapons. A copy of the communiqué issued at the end of the meeting, and agreed by all Ministers, has been placed in the Library of the House.

Mr. Wray: Is it not a fact that a question mark hangs over the decision taken by the nuclear planning group? Is it not also a fact that the Prime Minister, by delaying the modernisation of short-range missiles, is reluctant to accept that decision? Does the right hon. Gentleman's statement mean that there is to be an increase in the number of FE111 s and FE15s?

Mr. Younger: The hon. Gentleman is misinformed about the outcome of the meeting. The outcome, with the unanimous agreement of every nation present, was to reaffirm the nuclear defensive strategy of NATO, to reaffirm the need to keep weapons up to date and to reaffirm the unanimous view of all that a third zero would not be in the interests of the west. It cannot be said too often that we have had secure peace and freedom from war for so many years because of the existence of nuclear deterrence, which we would abandon at our peril.

Sir Anthony Grant: What does my right hon. Friend think would have been the reaction of his colleagues at that NATO meeting had he told them that it was the policy of Her Majesty's Government not to use the nuclear deterrent, even if necessary?

Mr. Younger: I am afraid that if I had made such a statement, nobody present from any Administration of any party would have agreed with me. Britain would have been in a minority of one, and I hope never to see Britain in a minority of one at NATO.

Mr. Sean Hughes: Will the right hon. Gentleman now answer the question that I put to him on 7 March, which the Minister of State also refused to answer on 11 April and about which I wrote to the Department a month ago and to which I have not received a reply? Do the Government take seriously the threat of a tactical nuclear attack on NATO's fixed assets in West Germany?

Mr. Younger: I am not sure what lies behind the question—[Hons. MEMBERS: "Answer."] The Government certainly do take seriously the large superiority in weapons lined up against us in western Europe—weapons of all


kinds; nuclear, conventional and chemical—and it is to make all those unusable that the policy of nuclear deterrence has worked so effectively for so long.

Mr. Marlow: How would my right hon. Friend set about planning into such a meeting a nuclear deterrent which he had committed himself not to use? Would it not be something of a white elephant? Or, to put it another way, would it not be like hiring an expensive guard dog which had lost its bark, which he was having put down and which he intended to stuff?

Mr. Younger: I cannot better my hon. Friend's simile. To arm oneself with a deterrent which one then said one would in no circumstances use would be about as effective as a feather duster.

West Germany

Mr. Roy Hughes: To ask the Secretary of State for Defence if he will make a statement upon his recent discussions with his West German counterpart.

Mrs. Clwyd: To ask the Secretary of State for Defence if he will make a statement upon his recent discussions with his West German counterpart.

Mr. Younger: I had discussions with Dr. Scholz on matters of mutual interest at the Western European Union and the nuclear planning group meetings last month. I have not yet had an opportunity to meet Dr. Stoltenberg who replaced Dr. Scholz as Federal Minister of Defence on 21 April.

Mr. Hughes: Will the Secretary of State try to realise that Germans will be killed in their thousands if weapons at present based on their soil are ever used, so that when they take part in East-West relations they welcome the opportunity to negotiate with the Soviet Union cuts in conventional and short-term nuclear forces to achieve levels below present NATO levels?

Mr. Younger: I well understand the sensitivities of people living in Germany to such matters, but it is a sad fact of geography that if any war were to break out it would he the British, Americans and Germans in the central front area who would be in danger. Nuclear deterrence exists to prevent war. It has been successful and only an irresponsible Government would abandon it.

Mrs. Clwyd: The Secretary of State has persistently reminded the Opposition this afternoon that they should live in the real world. Is not the real world the fact that the West Germans are responding to public opinion in West Germany which is opposed to the modernisation of nuclear weapons? Is it not a fact that 71 per cent. of people in Britain are also opposed to the modernisation of nuclear weapons, and 61 per cent. of those are Tory voters? Why do not this internationally isolated Government live in the real world and follow what real people are feeling in the real world?

Mr. Younger: I had hoped that I would be able to welcome the hon. Lady to the real world, but unfortunately I cannot, because the views that she has expressed are out of step with every Government of NATO, without exception, including the German Government.

Oral Answers to Questions — PRIME MINISTER

Engagements

Mr. Terry Lewis: To ask the Prime Minister if she will list her official engagements for Tuesday 9 May.

The Prime Minister (Mrs. Margaret Thatcher): This morning I had meetings with ministerial colleagues and others. I was also present at Victoria station to mark the arrival of President Babangida. In addition to my duties in the House, I shall be having further meetings later today. This evening I shall attend a state banquet in honour of President Babangida.

Mr. Lewis: Will the right hon. Lady consider establishing a statutory committee to oversee the standards of premium telephone services in recognition of the fact that the voluntary committee, set up and funded by British Telecom, has fallen into disrepute?

The Prime Minister: No, Mr. Speaker. I do not believe that the voluntary committee has fallen into disrepute. The Director General of Telecommunications, who has invited comments by the end of April on the proposed code of practice and amendments to the licences, is going precisely the right way.

Sir Peter Blaker: Will my right hon. Friend consider making available the health inspectors from the Ministry of Agriculture, Fisheries and Food to examine a product which is to be put on the market this afternoon—a gigantic nuclear fudge?

The Prime Minister: My right hon. Friend makes his own point in his own way. I expect that it will turn out to be unilateralism in a different wrapping.

Mr. Kinnock: How could the Secretary of State for Health say last Saturday that the Health Service is at the limit of its capacity to absorb money when the health authorities report today that hospitals are underfunded by £490 million this year?

The Prime Minister: If the right hon. Gentleman or anyone else suggests that hospitals are underfunded at their present rate, they must have been in dire circumstances when they had only one third of that amount from Labour.

Mr. Kinnock: Will the Prime Minister simply tell us whom she thinks is telling the truth? Is it the Secretary of State, who says that the Health Service cannot take any more money because it cannot absorb it, or the health authorities, who say that the hospitals are £490 million short? May we have a straight answer to a straight question?

The Prime Minister: will give the right hon. Gentleman a straight answer. Under him, the health authorities had only one third of what they are getting now, and that is what he cannot take. They are now getting three times as much as they had under Labour and they are doing far better than ever.

Mr. Brandon-Bravo: Has my right hon. Friend seen, or will she see, a splendid half-hour programme, independently produced for the BBC last week, called "Thatcher's Children"? Apart from the fact that it was made almost entirely in my constituency of Nottingham, South, which


is part of what she has rightly called the queen of the midlands, does she agree that the young people interviewed showed enterprise and willingness to meet an enterprise culture, which bodes well for the future? Does she also agree that it is quite wrong to equate enterprise with greed and selfishness?

The Prime Minister: The number of young people who are becoming self-employed, starting up their own businesses an taking advantage of all the opportunities is extremely encouraging. They are not only responsible for their own future but are looking after jobs for others and should be encouraged in every way.

Ms. Walley: To ask the Prime Minister if she will list her official engagements for Tuesday 9 May.

The Prime Minister: I refer the hon. Lady to the reply that I gave some moments ago.

Ms. Walley: Will the Prime Minister confirm that at the seminar at Downing Street energy conservation was recommended by the scientists as being the single thing which could deal with the problems relating to the greenhouse effect? Therefore, will she instruct her Minister of State, Department of Energy, on attending the European meeting on energy conservation this Thursday, to block the advice of civil servants which will effectively prevent a Community action programme for electricity conservation being adopted in this country—a programme already agreed by all other European countries?

The Prime Minister: There was not one particular proposal put forward at the seminar, as I think I explained in answer to a question last time I replied from this Box. One of the proposals was for more nuclear energy, because it does not put up carbon dioxide, and one of the most damaging elements in the greenhouse effect is the burning of fossil fuels. Another was that every effort should be made to retain tropical rain forests and to include that effort in one's overseas aid programme. The third thing was energy efficiency, and we pointed out that this country is using less energy now, at a far higher rate of production than we had in 1973. I hope that the hon. Lady will have read the speech made yesterday by our ambassador in New York asking for a kind of umbrella convention on greenhouse effect gases of the same kind as we have on ozone layer gases.

Mr. Wells: Will my right hon. Friend agree that to grant passports to 3·25 million Hong Kong Chinese would be a breach of the Sino-British agreement which she signed?

The Prime Minister: We could do not do that unless the British Nationality Act 1981 were revised and that would have to go through the House. There are many different opinions about the practical effect with regard to the granting of such passports, but it is not possible under the present law.

Mr. Grocott: To ask the Prime Minister if she will list her official engagements for Tuesday 9 May.

The Prime Minister: I refer hon. Gentleman to the reply that I gave some moments ago.

Mr. Grocott: Can the Prime Minister confirm that now that she is spending another £1·75 million of our money to mislead people on the poll tax it means that her

Government are spending six times as much on publicity and propaganda as any previous Government? Is it not perfectly clear that anything that is so expensive to sell must be a pretty shabby product?

The Prime Minister: If the hon. Member takes that view he must be pretty ashamed of some of the poll tax documents put out by his local authority. In regard to Government policy, the Government have a clear duty to ensure that everyone knows what his or her main rights and duties are. We are reaching 21 million households at a cost of under £1 million, which is very good value for money. Very soon, on 22 May, most councils will start registering people for the community charge and it is vital, therefore, that people have accurate information for the registration process.—[HON. MEMBERS: "Hear, hear."] If Opposition Members are saying "Hear, hear", they must agree that that accurate information should go to every household.

Mr. Ward: To ask the Prime Minister if she will list her official engagements for Tuesday 9 May.

The Prime Minister: I refer my hon. Friend to the reply that I gave some moments ago.

Mr. Ward: Does my right hon. Friend agree that the fines imposed by courts for river and harbour pollution are ridiculously low? Will she encourage the Magistrates Association to remind its members that they should use the full penalties available to them to discourage that form of environmental pollution?

The Prime Minister: I greatly sympathise with my hon. Friend's remarks. The average fine imposed by magistrates courts in 1987 was £450, compared with the maximum penalty available of a £2,000 fine and up to three months' imprisonment. That issue has been drawn to the attention of the Magistrates Association several times, most recently by my right hon. Friend the Minister of Agriculture, Fisheries and Food, and we all hope for a positive response.

Mr. Speaker: Mr. Ashdown.

Mr. Ashdown: rose—[Interruption.]

Mr. Speaker: Order. This takes a lot of time.

Mr. Ashdown: In view of the Prime Minister's recent comments, will she say what in her view is the role of the European Parliament?

The Prime Minister: The role of the European Parliament is laid down in the treaty as amended by the Single European Act, and I assume that the right hon. Gentleman will be able to read it.

Mr. Butterfill: To ask the Prime Minister if she will list her official engagements for Tuesday 9 May.

The Prime Minister: I refer my hon. Friend to the reply that I gave some moments ago.

Mr. Butterfill: Does my right hon. Friend agree that one of the most essential attributes of a political leader is the courage to stand fast to his or her convictions, even when that may temporarily be electorally unpopular? Does she further agree that any political leader prepared to compromise their most cherished political principles for


the sake of short-term electoral popularity is unfit to lead their party and even more unfit to be Prime Minister of this country?

The Prime Minister: Yes. As my hon. Friend knows, we are conviction politicians, and we never put power before principles.

Mr. Ashley: To ask the Prime Minister if she will list her official engagements for Tuesday 9 May.

The Prime Minister: I refer the right hon. Gentleman to the reply that I gave some moments ago.

Mr. Ashley: The Prime Minister is known to have a very high regard for our ex-service men, so how does she account for her Government's absolutely disgraceful conduct towards British nuclear test veterans compared with that of the United States Government, who grant compensation for 13 forms of cancer as compared with compensation for only two forms of cancer recognised by Britain? The Americans do not demand absolute proof, but the Ministry of Defence is bitterly fighting our ex-service men every inch of the way through the courts and is refusing to pay them compensation. That is a disgraceful state of affairs under a Government whose Prime Minister professes to love and admire our ex-service men.

The Prime Minister: As the right hon. Gentleman knows, cases were carefully looked at by a special inquiry of medical people, who did not find cause and effect. I say to the right hon. Gentleman with the greatest of respect that the cause and effect that he says has been proved has not been proved, and therefore compensation is not appropriate.

Mr. Favell: To ask the Prime Minister if she will list her official engagements for Tuesday 9 May.

The Prime Minister: I refer my hon. Friend to the reply that I gave some moments ago.

Mr. Favell: Has my right hon. Friend had time today to consider what would be the effects on the environment if nuclear power were to be phased out over the next 10 years, as the Labour party proposes?

The Prime Minister: Yes. I think that that would be very damaging. As my hon. Friend is aware, during that time a number of Magnox nuclear power stations will need replacing. We hope that, subject to planning permission, there will be four new nuclear power stations by the end of this century, replacing the coal-fired or oil-fired power stations that would otherwise be needed, and which would

add grievously to the greenhouse effect—which is something that the Leader of the Opposition does not want to happen.

Mr. O'Brien: To ask the Prime Minister if she will list her official engagements for Tuesday 9 May.

The Prime Minister: I refer the hon. Gentleman to the reply that I gave some moments ago.

Mr. O'Brien: Is the Prime Minister aware of the report in the Yorkshire Post today in which the CBI and the Association of British Chambers of Commerce criticised the Government for high interest rates, which have had a significant effect on small industries and businesses? When will the Prime Minister do something to lift the strain from small business people and people paying high mortgage rates? When will she take action to reduce interest rates?

The Prime Minister: We do not like to keep interest rates high any longer than we have to. [HON. MEMBERS: "We?"] My right hon. Friend the Chancellor of the Exchequer does not like to keep interest rates higher than need be, but the most damaging thing would he for inflation to go up to the kind of heights it reached under Labour. That is why interest rates must remain high for the time being.

Mr. Brazier: To ask the Prime Minister if she will list her official engagements for Tuesday 9 May.

The Prime Minister: I refer my hon. Friend to the reply that I gave some moments ago.

Mr. Brazier: Will my right hon. Friend agree that the privatisation of British Telecom has resulted in much shorter waiting lists for telephones, lower charges for calls and a much wider ownership of telephones among pensioners because of the reduction in standing charges? Will she not further agree that for any political party to talk about renationalisation is thoroughly irresponsible?

The Prime Minister: Yes, the privatisation of British Telecom has, indeed, led to a better service, a substantially increased number of telephones among pensioners and a very considerable reduction of the waiting lists. I agree with my hon. Friend that it is thoroughly arrogant of politicians with little experience of industry to say that they can run industry better than it can run itself.

NEW MEMBER

The following Member took and subscribed the Oath:
John William Patrick Smith Esq., for Vale of Glamorgan.

Burglar Alarms (Control)

Mr. Hugo Summerson: I beg to move,
That leave be given to bring in a Bill to regulate the manufacture of burglar alarms to ensure that they do not ring for more than thirty minutes after being set off.
Burglaries, assaults and break-ins are far too common. Many citizens today take steps to protect their security, and they take them in many different ways. They may acquire a large dog; they may even acquire the amplified voice of a large dog, which I gather is rather cheaper. They may join the local neighbourhood watch scheme. They may also obtain a burglar alarm.
When you come to think of it, Mr. Speaker, the burglar alarm is a rather selfish way of protecting one's property. By definition, when people decide to defend their property they are frequently away. They do not think it wise to leave their property unprotected; accordingly, they set the alarm and off they go. They may go to the Pas de Calais or to the Bois de Boulogne; they may go further still, to the uttermost ends of the world. They may go down to Antarctica. In any event, if someone breaks into their property and the burglar alarm rings, they will not be there to hear it.
All the local people, however, will be there to hear it. I am talking about entire neighbourhoods. I encountered two instances in my constituency the other day. One was in the Higham Hill area, where a factory owner set his burglar alarm and went away for the weekend. Off went the alarm on Friday night, and it rang for the whole weekend, disturbing—by my calculation—at least 1,000 people.
It can be even worse than that. Relatives up from the country may be staying, and they will not be used to such sounds. Their repose may be disturbed for the entire weekend. Again, there may be a sick infant in the house, or an elderly friend or grandparent. Perhaps they will be light sleepers; certainly they will not be used to the sound of alarm bells ringing throughout the weekend.
It does not stop there, however. I am talking not only about immobile property, but about mobile property. Just the other day I walked past a car and the alarm went off. I give the House my word that I had neither touched nor even looked at it: it was a particularly nasty modern Japanese model, and nothing would have induced me to go anywhere near it. Perhaps it took grave exception to me. Anyway, the alarm went off.
I went and had a good dinner. When I came back, three hours later, the alarm was still ringing. What is more, I noticed that several more windows were alight in the neighbouring block of flats than when I had walked past earlier. All those people had been roused and disturbed.
I am sure that we have all heard of people being driven mad by such alarms and taking the law into their own hands. I have heard of someone taking a 12-bore shotgun and shooting the alarm off the wall—although that is not to be recommended, being rather a dangerous practice. Others have been forced to acquire expertise in dealing with the alarms. They have mounted stepladders armed with spades or shovels—I gather that the old-fashioned coke shovel is best—to scoop the alarms off the walls. That is what people have had to resort to in their desperation.
I have discussed the matter with the Metropolitan police, and the House will be as horrified as I was to learn that according to their reckoning about 98·4 per cent. of times when they are called to deal with burglar alarms it is a false alarm. The alarms have not been set off by criminal activity. They may, for example, have been set off by a sudden gust of wind. It has been known, in country areas, for a herd of cows to wander past and set off an alarm.
Today I heard of the case of some people who bought a pet, a hamster in a cage. Playing on the little wheel in its cage, the hamster set off the burglar alarm. On that occasion not only were the police called but the RSPCA as well.
I have also discussed the matter with the National Supervisory Council for Intruder Alarms which has been most co-operative and has drawn my attention to the BS4737 with which all the best burglar alarms comply. The standard provides for automatic cut-off after 20 minutes and also that the burglar alarm should be regularly serviced and maintained.
The main thrust of my Bill would be to ensure that people installed high-quality burglar alarms and ensured that they were properly maintained and serviced in the full knowledge that if they were not, and the Bill becomes law, they would find themselves hauled before the beak and dealt with summarily. The amount of disturbance caused by alarms has got competely out of hand and should be stopped. If the Bill becomes law, the police will know in future that if a burglar alarm goes off there is a cat burglar, and there should be fewer cries of "wolf".

Question put and agreed to.

Bill ordered to be brought in by Mr. Hugo Summerson, Sir Geoffrey Finsberg, Mr. Keith Speed, Mr. Norman Hogg, Mr. Keith Vaz, Mr. Menzies Campbell, Mr. Chris Mullin, Mr. Tony Banks, Mr. David Martin, Mr. Max Madden, Mr. James Cran and Miss Ann Widdecombe.

BURGLAR ALARMS (CONTROL)

Mr. Hugo Summerson accordingly presented a Bill to regulate the manufacture of burglar alarms to ensure that they do not ring for more than thirty minutes after being set off: and the same was read the First time; and ordered to be read a Second time upon Friday 7 July and to be printed. [Bill 136].

Orders of the Day — Finance Bill

(Clauses Nos. 1, 32, 33, 44, 51 and 138)

Considered in Committee

Mr. Harold Walker: in the Chair.

Ordered,
That the order in which proceedings in Committee of the whole House on the Finance Bill are to be taken shall be Clause 51, Clause 33, Clause 32, Clause 44, Clause 138, Clause 1.—[Mr. Major.]

Clause 51

RELIEF

Mr. A. J. Beith: I beg to move, amendment No. 18, in page 39, line 7 leave out 'on or after 6th April 1990'.

The Chairman of Ways and Means (Mr. Harold Walker): With this, it will be convenient to discuss the following amendments:
No. 19; in page 39, line 9 leave out '(whenever issued)' and insert
'issued on or after 6th April 1990'.
No. 20, in page 39, line 9, at end insert—
'(aa) the individual making the payment has not entered into any other contract of private medical insurance prior to 6th April 1990.'.

Mr. Beith: The amendments address themselves to the issue of tax relief for private health insurance, one of the most widely trailed features of the Bill, which the Government expected to be greeted with widespread enthusiasm. I see no sign of that enthusiasm but I see it adding even more to the depression among many people working in the National Health Service about the Government's attitude to the entire service. I see it as a further demonstration that the National Health Service is far from being safe in the hands of the Prime Minister.
The amendments are designed to test the purpose of the new tax relief and to discover whether it is intended to open the door to an ever widening opt-out system in which more and more people are encouraged to believe that the only way to get reliable health provision is to buy their way out of the Health Service. In their reply to the amendments, perhaps Ministers will clarify the position.
At a time of such anxiety about the financing of the National Health Service, who but this Government would have chosen to devote at least £40 million immediately this year to tax relief for private health insurance? When the National Health Service is in such crisis, who but this Government would have diverted funds immediately to the private sector?
The crisis in the Health Service is partly but not entirely of the Government's making. Some of it relates to demographic change; to the increasing number of elderly people with which the Health Service must cope and the widening range of treatments now available for the illnesses and conditions from which those elderly people suffer. That crisis demands greater public funding, as successive reports of House of Commons Select

Committees, including the Social Services Select Committee and the Treasury Select Committee, emphasised. Even the Government's most ardent supporters in the Health Service—it is quite hard nowadays to find Government supporters anywhere in the Health Service—remain as anxious as ever, despite the new funds to which the Chief Secretary to the Treasury will no doubt refer, because those funds have not kept pace with the growing need that the Health Service faces and the higher rate of inflation from which it suffers through the commodities that it has to buy.
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Where did the proposal for such substantial expenditure on private health insurance originate? It did not come from within the National Health Service, where it is hard to find anyone who welcomes or is enthusiastic about the idea. Nor did it come from the House of Commons Social Services Select Committee which said in its fifth report:
In our judgment, the creation of new tax subsidy on all private health insurance cannot be demonstrated to extend total availability of health care. It would reduce the total public expenditure from which Health Service resources are drawn while at the same time narrowing the tax base still further.
That is a clear recċognition of the force of the arguments against such a proposal.
The proposal did not come from the National Health Service and it did not come from those Members of Parliament who take the closest and most careful interest in the National Health Service. It did not come from the Treasury Ministers who have to defend these clauses today. All the smoke signals from the Treasury were that Treasury Ministers were strongly opposed to the use of tax relief to encourage private health insurance and would regard it as a departure from their stated policy of broadening the tax base and reducing the rate of tax. The Government's declared policy on income tax is surely that the base for that should be as wide as possible and that the rate of tax should be as low as possible. Yet in this measure they are specifically narrowing the tax base and departing from their crusade against all tax breaks and tax incentives. It would be interesting to hear today whether they intend to abandon their crusade and return to an era of widespread tax relief and a narrower tax base or whether they have had to swallow one single inconsistent policy because the Prime Minister insisted on it.
The basis of the proposal is the Dulwich factor, the Prime Minister's view of retirement and old age, which is that the best way to health care is to opt out and therefore that should be subsidised and encouraged.
That leads one to question the purpose of the provisions in the minds of the Treasury Ministers. The amendments test the proposals by arguing that tax relief should not be granted to existing holders of private health insurance. It is necessary that we establish whether the measure is intended to be a growing provision for a widening number of people encouraged to opt out of the National Health Service, or whether it is what Treasury Ministers have recently said it is. I listened with some fascination to the Chief Secretary when he answered questions last Thursday. When he was pressed to give his view of the proposals he replied:
In a ringfence way it will help many elderly people who wish to continue medical insurance cover on retirement but who are unable to do so because they have lost the benefit of the employer scheme. At the moment of retirement their


income tends to fall and their premium tends to rise. We are seeking to retain the capacity for these people to sustain and retain the medical insurance they have previously had. That is entirely fair and reasonable, and I support it thoroughly." —[Official Report, 4 May 1989; Vol. 152, c. 351.]
I have heard of proposals being damned with faint praise, but that takes the prize for the faintest praise I have heard in a long time. The Chief Secretary was saying that the Government's proposal was nothing that the Prime Minister had in mind and that it was not an attempt to encourage large numbers of people to take up private health insurance, but was for those who had already found themselves in employer-based, employer-funded schemes and who, when they retired, had to decide whether to stay in the scheme. Such schemes become expensive, because at retirement age, people have to pay their own premiums and they are in the age bracket at which premiums are higher. For such people alone, the Chief Secretary seemed to imply, the Government were making special provisions. That is not what clause 51 says and it appears to be intended to be much wider. The Chief Secretary's view seemed to be attempting to find something in the Government's proposals that he could support with a modicum of enthusiasm. He will have to go much further tonight, unless his promotion chances are to be restricted, because he will have to say that he welcomes the proposal in its entirety and not only that small part he singled out when answering questions.
The proposal goes wider. It is part of the route to a two-tier Health Service, in which the better-off do not depend on the public provision. It will undermine the essential principles of the National Health Service, which one of my predecessors as Member of Parliament for Berwick-upon-Tweed, William Beveridge, laid down and which were implemented by the Labour Government in the years immediately after the war. There was the principle of a universal service, available free to all at the point of delivery and which should not require people to take out private insurance to provide for their essential health needs. There is no reason why people should not make provision for whatever they wish, whether health, leisure or a more comfortable retirement, out of their own taxed income. However, there is no reason why the generality of taxpayers, many of whom are struggling hard to make ends meet, should subsidise those who make the choice to have health provision outside the National Health Service. Those who have been called on to subsidise such provision are often those in the greatest need. That is an argument that Ministers are fond of using themselves against many aspects of public expenditure, but they seem unwilling to use it when it comes to the hard-pressed taxpayers at low levels of income subsidising those who are well-off enough to engage in private health insurance.
The provision will bring into the Health Service a further degree of inequity and it will benefit the richer pensioners because it will apply not only to the standard rate of tax, but to those on higher rates, who can claim relief at a higher level at the expense of the ordinary taxpayer. The cost of the provision is open-ended, but is likely to become expensive. I do not know how the Government made an estimate, but they have estimated that in the first year, the cost will be £40 million. That is the basic cost of giving relief to those already insured, who without any incentive have seen fit to take out private

health insurance. They have made a free choice to do so as they are entitled to do. The Government propose to reward those people with a subsidy of £40 million, although the money could better have been used in the Health Service itself.
Amendment No. 18 seeks to take away that element of cost by not providing tax relief for those who are already insured. As the number of pensioners with private medical insurance plans increases, both because of the increasing number of elderly people and because of the increasing proportion of those retiring who have been in company schemes, the cost could escalate considerably, which I presume is the Government's intention. What incentive will there be for private medical insurance firms to control costs when tax relief will make the premiums cheaper? As relief becomes more expensive and more widely enjoyed, Treasury Ministers know that it will become progressively more difficult to restrict and even more difficult to remove.
The Government's argument is that the provision will relieve pressure on the National Health Service. That argument is not even supported by those most closely involved in the health insurance industry. The Investors Chronicle analysed the benefits to be obtained from taking advantage of the tax relief and concluded:
private medical insurance should not be regarded as a substitute for the NHS, since it does not provide an emergency ambulance service or cover long-term hospital care.
The article goes on to say:
BUPA, the leading medical insurer with about 60 per cent. of the market, defines treatment as 'surgical or medical procedures the sole purpose of which is the cure or relief of … illness or injury'. This excludes chronic illnesses such as cancer and on-going treatment such as renal dialysis. Most insurers do not cover alcoholism or psychiatric problems".
The publication then lists a number of other problems not covered by private health insurance.
Private health cover is likely to take up those parts of the National Health Service that can be made profitable rather than those which cannot, by their very nature, be made profitable, such as after-care, community care, preventive medicine and the long-term treatment of conditions such as senile dementia, which is now a great problem for many elderly people. For all those things, most people will continue to depend on the National Health Service and the Health Service will pick up many of the after-care costs associated with treatments covered by private health insurance.
Even though the private sector may succeed in adding to the total of treatment carried out—one can only welcome any additional treatment that it secures—all health experience suggests that it will still give rise to more dependence on the National Health Service. There is no escaping the fact that any diversion of money into the private sector will not help the NHS with its problems but instead will make them infinitely worse. I simply do not understand how Treasury and Health Ministers can blind themselves to that fact—unless it is simply that the Prime Minister has power to override all reasoned argument in her Government.
There are 12 million people over 60, and the number is growing. Of those, 600,000 have so far chosen to invest in private health cover. It is costing £40 million to subsidise that 5 per cent. and it will cost perhaps £200 million to subsidise 25 per cent. of eligible pensioners. That constitutes a large and growing diversion of funds from the NHS, which it is in no position to afford. All over the


country, hospitals are crying out for staff—the continuity of resources that will enable them to staff facilities that already exist. As Ministers go round opening glossy new hospitals, they should be aware that such hospitals do not add up to much if they cannot be staffed and cannot provide the services that they are designed to provide. The funds that are to be diverted in this way could have helped to keep existing facilities going and to improve them.
The amendment would remove that first year burden. I have tabled it as someone who is wholly opposed to the principle of a public subsidy going to private health insurers. In seeking the support of the Committee for the amendment, I also seek its support in opposing the principle of money that is desperately needed in the Health Service being channelled into private health insurance, when those who wish to choose that insurance can already do so freely and need no public subsidy to encourage them.

The Chief Secretary to the Treasury (Mr. John Major): The hon. Member for Berwick-upon-Tweed (Mr. Beith) has started what I suspect will be a long march through the Committee stage of the Bill—both in Committee of the whole House and in Standing Committee. Although the hon. Gentleman argued against the principle of tax relief, amendments Nos. 18, 19 and 20 admit that principle and simply seek to limit the deadweight cost at the time of its introduction. If the hon. Gentleman will permit me to say so, I think that there is an inconsistency in his approach.
Amendments Nos. 18 and 19 are essentially paving amendments for amendment No. 20, which deals with the substance of the hon. Gentleman's concern, although I think that many of his remarks of principle trespass somewhat on the next group of amendments, which I expect to be widely debated. I know that many hon. Members, including the hon. Member for Berwick-upon-Tweed will wish to debate further the principle of tax relief when we reach that group.
The effect of the amendments of the hon. Member for Berwick-upon-Tweed would be to rule out any tax relief for people who are now, or who ever have been, covered by private medical insurance. I understand the hon. Gentleman's concern about deadweight cost, although on this occasion it is misplaced. I hope to show the hon. Gentleman that the effect of his amendments goes a good deal further than he intended and further, perhaps, on reflection, than he would think is desirable.
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I believe it is clear that the central point of the concern of the hon. Member for Berwick-upon-Tweed was the deadweight cost. It is inevitable with relief of this kind that, on its introduction, a significant proportion of the cost of relief will go to those who have already taken out private medical insurance, often at some personal sacrifice. However, it would be neither just, fair nor practical to discriminate against those who are already covered by medical insurance in that way. If we believe that tax relief is merited—I do, although the hon. Gentleman does not —such a discrimination would be entirely unacceptable. Those people thus discriminated against would feel—I think with some justice—that they were being penalised simply because they had had the foresight to make provision for their future needs, and in that they would be right. On reflection, the hon. Gentleman may not wish to do that.
I expect the new relief in later years to go increasingly to people who in retirement would not otherwise have had insurance cover. The deadweight cost, therefore, is not likely to run through in the future. It is those people who are the principal target for the new ring-fenced and limited relief proposed in the clause. By how much and how speedily that benefit will build up will depend on the rate at which the take-up of medical insurance increases over the next few years. That, too, is dependent upon uncertanties. To a large extent, it will depend on the way in which the marked is developed by the medical insurers.
I have already said to the hon. Member for Berwick-upon-Tweed that his amendments go further than he intended. They do so because they have unwelcome side effects, which I hope may encourage the hon. Gentleman to withdraw them at the conclusion of the debate. First, they would act against the main objective of the proposal, which is—I reiterate in essence what I said the other day—to encourage those who have had medical insurance cover during their working lives to continue it in retirement. Many working people enter into medical insurance contracts, usually known as "group schemes", where their employer negotiates the insurance cover on behalf of his employees as a whole. Premiums are usually significantly less than for cover taken out on an individual basis, and in many cases, as the hon. Gentleman will know, the employer subsidises the cost.
Individuals in such schemes, who bear part or all of the cost of medical insurance during their working lives, were intended to benefit from the relief when they retire, just as much as individuals whose insurance cover is wholly provided by their employer. But the amendments of the hon. Member for Berwick-upon-Tweed would draw a distinction between the two categories. Those who had a contract to make a contribution towards the cost would be debarred from the new relief on retirement, whereas those who had no contract, probably because the whole of the cost was borne by their employer during their working lives, would be eligible for the relief. Whatever other view the hon. Gentleman may have on the general principle, I am sure that he will recognise that that sort of discrimination could not be justified. I do not believe either that that is what the hon. Gentleman intended when he tabled his amendments.

Mr. Beith: The Minister is basing his argument on the case that he advanced at Question Time on Thursday, that the relief is intended to provide for those who had already entered either into a contract or some form of health insurance—I appreciate that there may be a technical difference—with their employers prior to retirement, and who then found it difficult to maintain their contracts after they retired. If that is the case, why is the clause so wide? Why is it not confined to such people?

Mr. Major: The hon. Member for Berwick-upon-Tweed is misrepresenting what I said. In answering questions the other day, I was referring to the people who had difficulty on retirement and to whose difficulty the clause was especially addressed. In no sense was I seeking to circumscribe the relief solely to those people. Other people may wish to take advantage of the relief and that is a decision for them but it is in respect of those people who face the particular hardship that we feel that the clause will go some way to putting right.
The second drawback of the amendments is that they would discourage people who are thinking of taking out medical insurance cover before next April. That cannot be justified and I suspect that the hon. Gentleman had not intended that effect when he tabled his amendments.
On the hon. Gentleman's central point, the amendments would have the effect of limiting the deadweight cost of the scheme to a negligible level in 1990–91 as, of course, the hon. Gentleman intended. The great majority of the £40 million cost in 1990–91 will be spent in giving tax relief to those over-60s who have already taken out medical insurance cover. That is the inevitable deadweight cost which, as I conceded a moment ago, is unavoidable with the introduction of a new relief of this sort. However, when considering the deadweight cost, one must bear in mind that it will help many of those people to retain their cover and not to surrender it in the future as some may have found necessary.
It is correct that only a small proportion of the initial £40 million relates to additional take-up as a result of the relief. However, the costing assumes an increase in take-up of about 10 per cent. in the first year from around the 600,000 who are covered at present to around 660,000. The hon. Gentleman's amendments do not limit the relief to those who do not have insurance cover now, but to those who have never had insurance cover at any stage in their lives. Therefore, the amendments would effectively limit the take-up of tax relief contracts to well below the 60,000 additional take-up that we envisaged. In practice, that would mean that any elderly person who had never had insurance cover would be ineligible for the relief, even on a wholly new contract taken out in retirement. Quite apart from the hon. Gentleman's objection in principle to tax relief, such discrimination between people taking out new insurance contracts is not logical and could not be justified under any premise.
I hope that for those reasons—and as the issue of principle remains for us to debate later—the hon. Gentleman will realise that the amendments are defective and do not meet the underlying objectives that he had in mind and I hope that he will feel able to withdraw them. However, if he feels unable to withdraw them, I shall advise my hon. Friends to vote against them.

Mr. Beith: I am glad that the Treasury's capacity for detecting hidden snags in proposals has increased since last year when the Chancellor brought forward his mortgage interest relief changes which were postponed until August with such dramatic consequences. I hope that he had the benefit then—but perhaps he did not and that is why he did it—of such detailed advice of the unintended side-effects of such amendments.
The Minister seems unable to see the wood for the trees because throughout our discussion he has seemed unwilling to clarify the essential purpose of this legislation. Amendment No. 18 goes to the heart of that matter and identifies the very group of people on whom the Minister wishes to concentrate relief and would deny them the relief. That gives us an opportunity of finding out what the Minister really thinks about this. The Minister has sought again and again to suggest that the main purpose of the clause is to concentrate relief on a group of people who have already entered into medical insurance but who find it difficult to continue with it when they have retired. He

has also suggested that all but 10 per cent. of the cost in the first year will go to such people rather than to people who come new into private health insurance. If that is the object of the exercise, the Government should have put a different clause into the Bill.
Treasury Ministers are hiding behind a slender tree—there are not many trees that the Chancellor could hide behind even if he tried—when they seek to pretend that the whole purpose of the clause is to help a few pensioners who entered employer-based schemes for health insurance before their retirement. Its purpose is to have a large and expanding opt-out from the National Health Service. It is the first step towards a two-tier Health Service.
I accept that there are technical defects in the amendments and I therefore propose to invite my right hon. and hon. Friend to vote against the principle of the clause at a later stage. I therefore beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Mr. Gordon Brown: I beg to move amendment No. 5, in page 39, line 7, leave out '1990' and insert '1993'.

The Chairman: With this it will be convenient to take the following amendments:
No. 8, in page 39, line 45, leave out from 'claim' to `deducted' in line 46 and insert
`set off against its profits liable to tax the amount.'.
No. 21, in page 40, line 23, at end add
'(10) Relief under this section shall be given at the basic rate of income tax only.'.

Mr. Brown: The amendments do not seek merely to limit the scope of private health insurance tax reliefs but prevent them from being implemented until after the next general election, the result of which will show clearly what the country wants done about this matter. On the Treasury's admission, the proposal will cost at least £40 million this year. That money will go, mainly to top rate taxpayers. The Chancellor has already admitted that at least half of it will go to the top 5 per cent. of taxpayers. As the Chief Secretary has just admitted, the majority will go to those who already have private medical insurance, and beyond that, the cash available is open-ended. Under the proposal, the number of pensioners eligible for relief is uncapped. Despite the claim last Thursday in Treasury Question Time that it would be ring-fenced, I shall show that the clause even includes 900,000 people who are not pensioners. The amounts on offer in tax relief are limitless. The proposal is inflationary and liable to push up Health Service costs without controlling them at all.
It will provide an unjustifiable subsidy of incalculable cost and completely unproven value. The proposal does not suggest that the Health Service should buy operations or services from the private sector and the industries within it, but that a minority of people over 60 should have a minority of their operations and treatments subsidised when they are carried out in the private sector. The main effect of the proposal is that a monthly, three-monthly or yearly cheque will go to BUPA, Private Patients Plan and other private health insurance industries. That cheque will be paid straight from the Government to BUPA and the other organisations.
We already know that the private health industry is subsidised by the Government. Employers can set the expenditure on private medical insurance against their tax


bills and people with salaries below £8,500 can avoid paying tax on private medical insurance. We know that the Government have set a limit on the amount of new investment that they will put into the Health Service and that there is a limit on the amount of money that they will give to the hospital service this year. They have set a limit on the amount of money to be used for new buildings and equipment. However, there is no limit on the subsidy that is given to the private sector in such an open-ended way. The scheme contains no rate-capping equivalent for BUPA, no cash limit for private medical insurance, and no cash ceiling is imposed by the Chancellor. It is an open-ended subsidy in which commercial medicine receives a signed cheque and effectively writes in the sum.
It is not surprising that the proposal has not been defended by the Chancellor in any meaningful way. It was not even mentioned by him in his Budget Statement, even though it has appeared in the Finance Bill. On Second Reading of the Finance Bill, the Chief Secretary said that the proposal had achieved "a false importance." At no point has the Treasury given the scheme anything other than lukewarm endorsement.
The reason for this is clear. It is a proposal which comes not from the Chancellor, Chief Secretary or Treasury, but from the Prime Minister. The proposal offends every Treasury principle. It is open-ended and uncapped, and it starts with a huge deadweight of people who already buy private medical insurance and who, therefore, will receive subsidies. It offends the Chancellor's own proposals for the simplification of the tax system.

Mr. Tim Smith: The hon. Gentleman said that there was no cash limit on this tax relief. Can he name one tax relief that is cash-limited?

Mr. Brown: The question that we are debating this evening is whether we should give open-ended subsidies. I think that the hon. Gentleman is genuinely worried about the scheme. He has already said:
What worries me is the deadweight cost of relief for all those elderly people who already buy private medicine without incentives. It is a subsidy to the private sector paid for by all taxpayers. If we don't stop here then it may spread to other fields such as independent schools.
If the hon. Gentleman wants to pursue his objections to this open-ended subsidy and to prevent it from escalating into other areas, he would do well to support us in the Lobby this evening. I hope that other Conservative Members who have already expressed severe doubts about the advisability of the scheme will join him in opposing it this evening.
4.15 pm
I said that this offended Treasury principles. The Chancellor said in his 1988 Budget speech that the objective behind his tax reforms was to sweep away tax breaks. Yet, this is the introduction of a new tax break —as we had last year—which is even more unjustifiable than some of the tax breaks he is trying to sweep away. It is hardly supported by the Department of Health, either. It was barely mentioned in the Health Service review. It is not mentioned seriously in the working papers, or covered in the £1 million advertising campaign that the Health Secretary launched. The new Tory campaign guide, published only a few days ago, contains 15 pages on the National Health Service and only one sentence on this private medical insurance proposal. It is the proposal that dares not speak its name.
Perhaps the best idea of the Health Secretary's views on this matter was given when he became Secretary of State for Health in July and the proposal was first floated. I quote from an interview that he gave and which was mentioned in The Independent on 27 July 1988. Speaking on private medical insurance, he said:
You don't need it. We have a National Health Service.
It is not surprising that the hon. Member for Beaconsfield (Mr. Smith) is not the only Conservative Back Bencher who is unhappy about the proposal. I have noted from the debates on this matter that the hon. Member for Horsham (Sir P. Hordern) has opposed the proposal and that the hon. Member for Corby (Mr. Powell) is very unhappy about it. I believe that more Conservative Members, some of whom will have absented themselves today, are unhappy about it.
In the Finance Bill debate that we held only a week or two ago, apart from the hon. Member for Dover (Mr. Shaw), whose excuse is that he has had no research assistance to help him for some time, the only person who spoke in support of the private medical insurance proposal was the hon. Member for Gillingham (Mr. Couchman). He declared an interest in the form of his connection with a company called Denplan which led him to believe not only that the proposal should go ahead but that it should include insurance for dental treatment and operations. So the one Conservative Member who has spoken up strongly in the debate on this matter has had to declare an interest in it.
This proposal was not in the manifestos of 1979, 1983 or 1987. It was never mentioned to the public as a possibility before it was thrust upon us as a result of the Health Service review, and the reason why is clear; it has neither the support of the Health Department nor a great deal of support in the Treasury. In the battle between the Chancellor and the Prime Minister over the garden wall at No. 10, the shriller voice was the more successful. The Chancellor's opposition on behalf of established Treasury principles was shouted down.
Of course, there was a promise of consultation on the Health Service reforms. In January, when the Secretary of State for Health announced the reforms he said:
We will be consulting … we shall, of course, listen particularly to the views of the public and the patients."—[Official Report, 31 January 1989; Vol. 146, c. 173–174.]
But there has been no consultation on this proposal, as the Chief Secretary well knows. There has been a review that was not independent or impartial and which never included a doctor, a nurse, or even a patient. It was staffed mainly by people who use the National Health Service only when the private sector fails them. Within a few weeks of the promise of consultation, this clause is being imposed without consultation, without full information, and even without—as yet—the publication of the regulations which allow us to judge how far the proposal will go.
The only consultations held in the past few weeks have been with the private health industry. So keen are the Government to push the proposal ahead that the one group with which they have been prepared to consult has been the private health insurance industry.
Never before has such a significant change been made in the principles underlying the National Health Service with so little consultation. Faced with a choice between listening to patients and doctors in the National Health


Service and listening to their friends in business, the Government listen to their friends in the City and in business, first time and every time.
So keen are the Government to push this proposal through that they have made it a subsidy which is paid directly, through the cost being reduced, to the person with private medical insurance.
I have examined the housing benefit forms that have been devised by the Government since the reform of social security. When pensioners want housing benefit, they must first obtain a form, fill it in, carefully read the detailed questions and supply the necessary information about their income, the income of people staying in the house and the details of savings and capital. They must be open about every bit of cash in their possession. All of that must be done to obtain a minimal amount of housing benefit.
On the other hand, to get this private medical insurance tax relief, people need only wait for the private medical insurance industry to give it to them. The Treasury has made it that easy for people to obtain it. But the means-testing that is done for housing benefit, poll tax rebate and everything else is such that for pensioners it is a huge hurdle to overcome.
Whatever the Government claim, this subsidy—and it is a subsidy—will go to a minority of pensioners for a minority of treatment and operations. The best way to relieve pressure on the NHS—the test which the Government say they are imposing—is not to give money to private health services but to give it directly to the NHS.

Mr. James Couchman: The hon. Gentleman referred pejoratively to my Second Reading speech. He may not be aware that my main point was that the benefit coming from this tax relief will directly benefit health care. Whatever money is given by way of tax relief will represent an addition to the resources that go to health care in Britain.

Mr. Brown: The hon. Gentleman has missed the point. Three Members of the Cabinet are over 60. They will enjoy a subsidy on their private medical insurance policies. They will get that relief without even having to claim it. The only claim they will need to make will be in respect of the top rate tax relief, but they will get the basic rate relief automatically.
I have in my constituency a number of people on NHS waiting lists waiting, for example, for cataract and hip joint operations. The Government have made a choice between giving additional money to the NHS, to people who need it, and giving the money to people with private medical insurance policies, people who do not need it.

Mr. Couchman: Is the hon. Gentleman aware that those on NHS waiting lists will benefit as a result of people taking their ills to the private sector?

Mr. Brown: If what the Government propose goes ahead, those in the queue will be subsidising the queue-jumpers. If the Government want to use £40 million or more of resources to the best effect to help people on waiting lists, the most cost-effective way of doing that would be not to give it to BUPA and other similar bodies, but to give it to the NHS.

Mr. Couchman: Will the hon. Gentleman concede that £40 million of tax relief, even at the top rate of tax, would result in £100 million worth of additional resources going to health care?

Mr. Brown: I do not accept that. I assume that the same point will be made by the Chief Secretary. That £40 million will not go to pay for operations and hospital treatments. The hon. Member for Gillingham knows that because he has been advocating Denplan as an insurance scheme. The money will go to pay for the administration and marketing of BUPA and other schemes, and not necessarily towards improving the quality of health care.

Mr. Win Griffiths: Does my hon. Friend agree that Mr. David Lock, the managing director of Private Patients Plan, gave the game away when he asked the Government:
Please do not ignore the incentives which would encourage patients to. provide for themselves and their families and reduce government expenditure on the NHS"?

Mr. Brown: I am grateful to my hon. Friend for making that point. Not only have many people in the private health industry given the game away, but almost every organisation associated with the NHS—the Royal College of Nursing and others—has come out against the plan.
Only a few days ago the Chief Secretary, in support of the Budget, quoted comments from Help the Aged, saying that it gave an unqualified welcome to the proposals in the Budget. But I have to tell him that only today it has said that the proposals being put forward for private medical insurance tax relief are a complete irrelevance. The same has been said by Age Concern and many other organisations.
The Chief Secretary may also like to know that the Centre for Policy Studies, the Right-wing organization that the Prime Minister helped to set up some years ago, has not come out in support of the plan. It has advocated that the plan should not be proceeded with. It said:
It would be wrong to give it tax relief … The US system of private health insurance came close to collapse because nobody has responsibility for managing health costs. This mistake should not be repeated here.
It goes on to give three additional reasons why it believes that private medical insurance tax relief should not be operated.
Mr. Eindhoven, an American research scientist, has been given a great deal of credit for developing the proposals for the internal market on which the Health Minister and the Prime Minister have based their plans. Only a few days ago, in an interview to the British Medical Journal he was asked:
Were there no specific points"—
in the Health Service review—
that made you think 'my goodness?
Mr. Eindhoven said:
The only thing like that was the proposal of tax relief for private health insurance. My reaction to that is watch out. This has been a disaster for us in the States.
He was asked why, and he said:
Because it costs the federal budget a great deal of money —about $40 billion a year—and works to encourage the choice of a more costly rather than a less costly health scheme.
Others have made exactly that sort of comment on the proposal. There is no support from the Health Service, there is no support on the basis of established Treasury principles, and there is little support even from some people in the private medical insurance industry.
There are good reasons why the country should be opposed to the scheme.

Mr. Tony Marlow: The hon. Gentleman has a reputation for being an ex-student leader, so obviously at some stage in his life he was educated. Therefore, why cannot the hon. Gentleman understand that if the Government provide an incentive for health insurance more people will take it out, enabling more people to obtain their health care elsewhere, and freeing resources in the NHS for his constituents and my constituents and adding to the increasing resources that the Government have already put in to the Health Service?

Mr. Brown: The hon. Gentleman fails to understand the drift of the argument. The Opposition argue that if the Government have £40 million—this also happens to be the argument of any serious person who has looked at the issue—the best and most economical way to use those resources to provide health care is not through a subsidy to the private medical insurance industry or people who take out private medical insurance, but to use them in the NHS. The hon. Gentleman has been unable by his question to persuade us that he has any case for the point of view that he has put forward.
The problem is that we are not just talking about £40 million going in tax relief to private medical insurance; This is £40 million as a start that is going to a small number of people who are already rich enough to afford that private medical insurance in the first place.
Doubtless one or two people in the lower income group will benefit from the scheme, but we know that half the cost of the first year of relief will go to the top 5 per cent. of pensioners—people who are already rich enough to afford private medical insurance and who already have massive tax relief from the Government in many other areas.
4.30 pm
Even those people, who have benefited so much, would say that if the Government had wished to give to pensioners the first priority should have been to do something about housing benefit cuts, eyesight and dental check-up charges, and low poll tax and rate rebates—all things that they know have done damage not just to individual pensioners but to the integrity of our community life in this country.
The Chief Secretary tells us that the aim of this scheme is to help a number of elderly people who have had their private medical insurance through their companies all their working life and will be unable to afford to continue it after the age of 60. Somehow, he tells us, a priority for public spending resources in this country should be that a small group of people who have had private medical insurance as a perk from the company during their working life should now receive from the taxpayer additional resources to pay for their health care.
I have had dozens of constituents come to see me about the freezing of transitional protection. I have had scores of constituents complaining about the implementation of charges for eyesight tests and dental check-ups and rising prescription charges. I have had hundreds of constituents worried about cuts in housing benefit. I have not received one constituent inquiry from someone worried about this tax relief for pensioners. Those people who argue the case for private medical insurance tax relief must bear in mind that the people most in need of resources from the

Government are not those rich enough to afford private medical insurance but those whom the Government have made poor as a result of housing benefit and other cuts.
Our objections to this tax relief go beyond that. It is not just that only a few at the top are liable to benefit; it is that this subsidy is open-ended. The Chief Secretary has not yet told the House, and it has not been in the public arena to the extent that it should have, that this tax relief proposal is not just open to people over 60. There are 900,000 people under 60 who will be entitled to receive the benefit of this tax relief because they are married to people over 60 and their policies will be covered by the tax relief as well. That is another reason why this scheme is not ring-fenced, as the Chief Secretary says; it is open to another group of people, as high a figure as nearly 1 million of them, throughout the country.

Mr. Beith: There is an even larger potential group of people who can also benefit from high-rate tax relief. Any relative who cares to pay the premiums for a pensioner to whom he is related can get the highest rate of tax relief in that way.

Mr. Brown: I am grateful to the hon. Gentleman for pointing that out in his second intervention this afternoon. BUPA itself has said that this scheme will be used by what it calls yuppies—people with high salaries who buy private medical insurance as a present for their elderly parents. I have to ask the Chief Secretary whether he thinks it is a proper use of public sector resources to subsidise gifts of this sort.
As to the question whether the subsidy is open-ended, I was interested in what the Financial Secretary said when he dealt with this matter. He said that he could not tell us what the costs of this scheme would be—rather like the Chief Secretary this afternoon. So we have the Treasury entering into a scheme without knowing what the cost will be. Then he said that the costs depended on meeting the new marketing challenge. The question was how much BUPA and other private sector organisations would meet the marketing challenge. So the resources devoted to this scheme are not to be decided on the basis of the needs of pensioners or the needs for health care throughout the country; they are to be decided by the extent to which BUPA meets the new marketing challenge. It is the advertising budgets of Saatchi and Saatchi that will decide the take-up of the scheme rather than the real needs of pensioners throughout the country.
I will tell the Chief Secretary and the Financial Secretary how these resources could be better used. The £40 million, if it is really £40 million, that is being devoted this year to private medical insurance would pay for 3,000 nurses, 1,000 consultants, 20,000 ventilators, 1,300 ambulances or nearly 20,000 hip-joint replacement operations. But the money will not go to guarantee any operations or treatments; it will merely go to provide tax relief on insurance money that is paid out to companies such as BUPA.
What will BUPA and similar organisations be able to do for pensioners with the money that is given in the form of subsidies to those who subscribe to private medical care? People who have had illnesses or even symptoms in the past cannot, when they are aged over 60, obtain private medical insurance in many cases. Policies will not anyway cover the mentally ill or those requiring psychiatric care, the physically or mentally handicapped, or those suffering


from long-term conditions such as cancer. So that money will be used to subsidise a minority of people undergoing a minority of treatments, and almost certainly a minority of the operations that they really need. Is that the best use of £40 million or more of public sector resources?
Much of that money will be spent on administration. We know that about 6 per cent. of National Health Service costs and 5 per cent. of hospital costs are accounted for by administration. However, we know also that 10 per cent. of BUPA's costs are accounted for by administration, and that the figure is 12 per cent. in the case of Private Patients Plan. That is hardly cause for arguing that money is better spent in the inefficient private sector. The private sector under BUPA is the most inefficient of all.
The cost of a hernia operation in the private sector is more than twice the National Health Service figure, as is that of a hip joint replacement. Operations as simple as cataract removal also cost twice as much in the private sector. The Government support the private sector not because it is efficient but simply because it is the private sector. They oppose extra funds for the public sector not because it is inefficient but simply because it is the public sector. The Government prefer to subsidise an inefficient private sector rather than support an efficient public sector.
The Prime Minister herself, even though she supports the private sector, acknowledges that the coverage it can give is inadequate in respect of major operations. She commented:
The day may come when we"—
she uses the term "we" again—
have to have a very complicated operation. I hope not. I hope it will never come. But if it does, then I am afraid that one could not possibly perhaps bear that on private insurance.
Those are the words of the Prime Minister, who is the greatest supporter of private medical insurance and the author of the subsidy—but she recognises that no matter how large the resources she gives to private medicine to try to make it function more efficiently and encourage more people to subscribe to it, at the end of the day the private sector is unable to do the job if a major operation is required.
The National Association of Health Authorities today published a new survey of Health Service finances, which reveals very clearly the remaining backlog. The survey claims that since 1980 the Government have underfunded the National Health Service by £3 billion. Last year underfunding was of the order of £400 million, as it was the year before that. Despite all the claims made by the Chief Secretary and other Ministers as to the huge resources that they made available to the Health Service this year, the hospital and community health services remain underfunded by £490 million.
On the same day as that survey is published, the House is asked to divert to the private sector money that should go to the Health Service. All health arguments and all traditional Treasury arguments have been set aside. The only question asked by the Prime Minister was what could be done for the private sector, and how could the rich be helped to help themselves.
We now know what the Chancellor meant when he gave that unintended interview to the correspondents on that Friday last year which caused so much embarrassment. He

said then that he wanted to target benefits to pensioners, that only a tiny minority of pensioners concerned him; what he did not say was that the tiny minority were not the poorest in the land but the richest and that the targeting was to be on the richest, not the poorest.
This proposal has been rejected by almost everyone who has looked at it. It commands very little support, even on the Minister's Back Benches. It is objected to by all health organisations which have looked at it. It is even rejected by many of the Right-wing think-tanks which the Minister knows are the authors of many of the worst proposals for the National Health Service. Yet Ministers and the Government have made a choice between giving Health Service resources to those who need them and to those who do not. They have chosen to give these resources to those who do not need them. That is why we will oppose the proposal this evening.

Mr. Major: In moving his amendment, the hon. Member for Dunfermline, East (Mr. Gordon Brown) was typically forceful, and it might be appropriate at the beginning of what I suspect will be a lengthy and interesting debate to set out the background and concerns to the proposal to introduce tax relief and the secure justification we believe exists for it.
As I listened to what the hon. Gentleman said, I found it hard to appreciate that we are discussing tax relief for a limited number of elderly people rather than, as his dramatic delivery would have led us to believe, the ritual slaughter of the first born. It is curious that on all other occasions when assistance for the elderly has been suggested—and a lot of assistance for the elderly has been introduced under this Government—the Opposition tend to support it but on this occasion, for rather curious reasons, which I will come to later—[Interruption.] Not the rich elderly, as hon. Members will find out in a moment. I fear the hon. Gentleman has the measure rather out of perspective, though the manner in which he presented his case will enable elderly people who enjoy tax relief and who may enjoy tax relief to put the Opposition very clearly in perspective.
In the course of his remarks the hon. Gentleman made a number of errors of substance, to which I shall return. There were a number of minor errors, which I simply correct in a spirit of accuracy. [Interruption.] The hon. Gentleman finds accuracy funny, as we have noticed before. My right hon. Friend the Chancellor mentioned tax relief for health insurance in his Budget. The cost of £40 million which the hon. Gentleman referred to arises, of course, next year, not this year. I assume that was a just a slip of the tongue.
The position about the open-ended cheque is not at all correct. Treatments which may be covered will be specified in regulations and there is a natural limit to those. Those regulations will be available to the House at a later stage.

Mr. Gordon Brown: Will the right hon. Gentleman give way?

Mr. Major: In a moment. If the hon. Gentleman intervenes every time I point out his inaccuracies, we will still be here in the middle of August.
The hon. Gentleman is, of course, wrong about getting relief without claiming it because the application form for insurance cover will also contain the claim for tax relief. Whether the claim is made is optional. Claimants will have to certify in the normal way as to their eligibility for tax


relief, just as with mortgage interest tax relief, which to the best of my knowledge the Opposition have not yet declared it to be their intention to abolish.
The hon. Gentleman made some other errors, to which I will return when we deal with the more substantive parts of this amendment.

Mr. Gordon Brown: Will the Chief Secretary confirm whether there is a ceiling on this tax relief or not?

Mr. Major: There has never been in any tax relief of any sort the possibility of setting a cash limit. If the hon. Gentleman does not understand that, he ought not to be the Shadow Chief Secretary, for he understands very little. As it happens, Shadow Chief Secretary is likely to be the limit of where he gets—[Interruption.] I am perfectly prepared to exchange badinage with the Opposition if they wish, but they may care to listen to the substance of the debate.
Amendment No. 5 would delay the introduction of tax relief on private health care provision until 1993. As the hon. Gentleman made clear, its intention is wholly different; but the effect is simply one of delay, which implies—inaccurately—that the Opposition accept the principle of tax relief and merely wish to defer it. The Opposition, however, are wholly opposed to tax relief, as any casual listener to the hon. Gentleman's tirade will have understood. The hon. Gentleman hopes that a delay beyond the end of the current Parliament will enable a new Labour Government quietly to strangle the extra help for the many elderly people who will welcome it. It will not, of course, because there will be no new Labour Government after the next general election. One of the reasons for that is Labour Members' basic and instinctive hostility to self-provision, self-dependence and individual choice, which they are showing yet again today. They hate those things; unless provision is made by the state, in their eyes it is not good.

Mr. Gordon Brown: Will the Chief Secretary simply confirm that of that £40 million he expects at least £20 million to go to the richest people—the top 5 per cent.?

Mr. Major: Let me tell the hon. Gentleman in precise terms that the Inland Revenue's best estimate is that, in the first year of the tax relief, well over 80 per cent. of those aged over 60 and covered by medical insurance will be either basic-rate taxpayers or not liable to tax at all. I hope that the hon. Gentleman will remember that when next he makes his inaccurate speeches.

Mr. Gordon Brown: Will the Chief Secretary now answer my question? Is it or is it not the case that half the £40 million that he expects to be set aside will go to top-rate taxpayers?

Mr. Major: I do not expect that to be the case. My answer to the hon. Gentleman's question showed clearly the extent to which he either does not understand what is going on or deliberately chooses to misrepresent it. I have opted for the charitable explanation, although others, of course, may not.

Mr. Win Griffiths: Is the Chief Secretary aware that NHS provision is paid for by taxpayers and payers of

national insurance? The clause merely gives extra help to a very small number of people, when those resources could be better used in the NHS.

Mr. Major: I understand the hon. Gentleman's point entirely, but we live in a society where there is a private medical sector as well as a National Health Service, whether he likes it or not. I suspect that that point is not alien to him. The private medical sector provides a good deal of care for people who would otherwise need to be treated within the NHS, which would add to the difficulties and delays that sometimes occur within it. [Interruption.] If hon. Members will permit me to get past the few first seconds of my speech, I shall explain the point directly, as it is the substance of the amendment.

Mr. Gordon Brown: Is the Chief Secretary willing to correct his statement of a few minutes ago? Is he prepared to accept the accuracy of the answer given to me by his right hon. Friend the Financial Secretary on 22 March, stating that about half the relief is expected to be received by higher-rate taxpayers?

Mr. Major: As far as I am aware, what I said a moment ago is correct: 80 per cent. of the beneficiaries will be basic-rate taxpayers. Although it is not possible to be certain about how that 80 per cent. breaks down within the total tax relief, it is clear that over a period the majority will go to basic-rate taxpayers—or indeed, as I shall explain shortly, in reduced payments for those who are not taxpayers at all. They will find, as we operate a MIRAS-type system, that the cost of their medical insurance cover is reduced by the rebatable element—25 per cent. at present—when they make their first payments under the new system. That will in our judgment grow over the years.

Mr. Gordon Brown: Will the Chief Secretary tell us whether the Financial Secretary was right or wrong? I asked on 22 March:
what is his estimate of the proportion of the £40 million set aside for tax relief for private medical insurance that will go to top-rate taxpayers.
He replied:
Around one half of the cost of relief is expected to be received by higher rate taxpayers."—[Official Report. 22 March 1989; Vol. 149, c. 588.]
Is the Chief Secretary disowning the Financial Secretary?

Mr. Major: The hon. Gentleman is overlooking two factors. [Interruption.] I am just about to explain to the hon. Gentleman since he does not understand. That includes, first, the basic rate of tax relief. So only a proportion of that half to which he refers is higher rate tax relief, for they would be entitled to the basic relief in any event. [Interruption.] It is no good hon. Gentlemen giggling and shouting. That happens to be fact. Secondly, since 80 per cent. of the beneficiaries will be basic rate taxpayers or not taxpayers at all—I shall reiterate the point so that the hon. Member for Dunfermline, East does not get it wrong again—over a period of time the majority of the tax relief will go, not to the rich, whom the Opposition claim are receiving such disproportionate amounts, but to people who are basic-rate taxpayers or not taxpayers at all. I hope the hon. Gentleman now understands the point. [Interruption.] If the hon. Member for Holborn and St. Pancras (Mr. Dobson) wishes to intervene instead of cackling in such an absurd fashion


from a seated position, I shall give way to him. He is the best advertisement I have yet seen for having television in the House. Then people might see how he behaves.

Mr. Frank Dobson: Will the Chief Secretary confirm that of those people who have private health insurance, no fewer than 50 per cent. go into a National Health Service hospital when they are sick and in need of in-patient hospital treatment, thus saving the National Health Service not a penny?

Mr. Major: As the hon. Gentleman's hon. Friend pointed out a moment ago, those who have private medical health insurance will also have paid their tax and national insurance contributions, so they have the same entitlement as the hon. Gentleman, if they choose to exercise it, to use the National Health Service. If they choose to pay separately and not use the provision, that is a matter for them which ought not to concern the hon. Gentleman.

Mr. Denzil Davies: As I understood it, the Chief Secretary said that some elderly people who do not pay tax will get a benefit. Will he please explain that? I presume that most people on state pensions who do not have any other income do not pay tax. I take it that the personal allowance still covers the whole pension. Is he saying that that pensioner can deduct a sum equivalent to tax at the standard rate when making the payment of the premium, and can retain that money and not have it reclaimed by the Inland Revenue?

Mr. Major: That is entirely correct. Since a system like MIRAS will operate, someone who is not a taxpayer would have the equivalent of the basic rate refund deducted from the premium, so that person would have a lower premium than otherwise.

Mr. Denzil Davies: Could the insurance company reclaim the sum in full from the Inland Revenue?

Mr. Major: Yes, in precisely the same way as the mortgage interest relief system operates, as the right hon. Gentleman, as a former Treasury Minister, will know.

Mr. Beith: Will the Chief Secretary make it clear that the non-taxpaying pensioner will not have to sign a form when making the initial claim to say that he or she is liable to tax?

Mr. Major: I will have to check that, but I suspect that people will have to indicate that they are eligible—no, I think the answer is that they will not because the 25 per cent. would be deductible automatically in any event. If I am inaccurate about that, I shall write to the hon. Gentleman later.
One of the curiosities about the position of the Opposition, although they may not care to admit it, is that they are resolutely opposed to helping the elderly help themselves, or to helping families help the elderly, despite the general position that they take that they care and want to assist the elderly in whatever way is possible. The 5·5 million people currently covered by private medical insurance will surely notice that.
I wish to turn in a moment directly to the concerns that the hon. Gentleman raised, but I should like to say something first about private health care provision and

public health provision. Although the Opposition choose not to mention it, public provision for the National Health Service has grown dramatically in recent years to deal with a variety of changes in circumstances, such as improving medical treatments, greater public expectations and demographic changes. By any realistic yardstick, the National Health Service is better funded than ever before. I, for one, have no doubt that that trend will continue, for we are determined to produce and improve public health care. The whole thrust of the health reforms has that in mind.
Where we part company with the Opposition is that we believe that support for public provision should not mean opposition to private provision, although for many—I suspect not all—Opposition Members, private provision adds to the total resources for health care and should generally be welcomed. As to provision for health care, even the Labour party yesterday committed itself to the belief that firm public expenditure control was desirable and necessary. Whether the Labour party will ever pay more than lip service to that belief, or have the chance to, is a separate matter.
I must make it clear to the hon. Member for Berwick-upon-Tweed (Mr. Beith), who raised the point earlier, that I welcome the expansion of private health care provision. I welcome it unreservedly, as one who has invariably used the National Health Service.
There is a variety of reasons for my welcome for private health care provision. First, it relieves pressure on the National Health Service. Secondly, it increases the scope for co-operation between the National Health Service and the independent sector. Thirdly, it increases individual choice, and I find that attractive. It also means, of course, a wider range of options for National Health Service management as well as individual patients.
There is already a growing partnership between the National Health Service and the independent sector. Through the reforms that we have in mind we want to open up further opportunities for the public and the private sectors to work together, providing services for each other, engaging in joint ventures, and sharing the use and spreading the cost of expensive hospital facilities. Anyone needing treatment, including those of us who continue to depend wholly on the National Health Service, can only benefit from closer co-operation, for private provision will supplement and not replace public provision in the National Health Service.
The new relief that we are debating is limited. It is not a general relief for private medical care or even for medical insurance. It is limited in scope and ring-fenced to those over 60, or, as the hon. Member for Dunfermline, East accurately pointed out, the wives of those who are over 60, who also receive age allowance on exactly the same principle—unless the hon. Gentleman proposes to withdraw the age allowance in those circumstances. If he wishes to do that, I will let him admit it now; I assume that he does not. I am pleased that he is consistent and agrees with the principle.
I must make it clear to him that we have no plans to extend the relief further down the age scale. Direct payments for private health care and most medical insurance premiums for those aged under 60 will not in future attract tax relief. [Interruption.] Many things come forward in the debate, but I think that a reference to the dock labour scheme may stretch the Chairman's patience.
The central justification for the new relief is entirely clear. It is one that I have set out before. As people reach 60, the cost of their private medical insurance rises. If they retire, their income generally tends to fall. Of course, usually they lose employers' contributions to any private medical insurance scheme to which they may have belonged. Many elderly people think that it is grossly unfair, and for the benefit of the hon. Member for Berwick-upon-Tweed I must make it clear that I agree with them without qualification. Clause 51 addresses that difficulty. The effect of the clause that the amendment seeks to wreck is that the new tax relief will be available from April 1990 where an individual aged 60 or over is covered by eligible medical insurance. It will be due where the premium is paid by the elderly themselves or where another individual pays the premium on their behalf. In most cases, that individual is likely to be a son or daughter or other close relative; but it could equally be a family friend.

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Mr. Win Griffiths: The Minister is enunciating what I take to be a principle which he wishes the Government to spread throughout tax relief between the employed person and the retired person. He seems to be saying that it is one way of helping people belonging to company-financed health plans to continue with those plans after retirement. Does he therefore agree that that principle could apply to any other perk that a company provides, such as a company car—so that people could receive some help with having a car after they retire—or any scheme of luncheon vouchers, as retired people might need help with their meals after they retire. Is the Minister seriously trying to tell us that there is a need to provide help with perks that were received during employment when people retire?

Mr. Major: Unlike the hon. Gentleman, we know the difference between health relief and luncheon vouchers. That is why we have ring-fenced that relief specifically to people seeking some form of health or medical insurance. Unlike the hon. Gentleman, we think that that is particularly important and brings comfort to many elderly people who are keen to continue with the insurance, the protection and the cover that they enjoyed until the age of 60. It is ring-fenced to that.

Mr. Win Griffiths: That is nice to know.

Mr. Major: The hon. Gentleman now need be in no doubt about it.
Basic rate relief will be given at source—like MIRAS to which the right hon. Member for Llanelli (Mr. Davies) referred a moment ago—so that only a net premium will need to be paid to the insurer. That means, even where a subscriber is not liable for tax, tax relief will still be given and only a net sum will be payable.
The hon. Member for Dunfermline, East repeatedly referred to the fact that tax relief benefits only the rich, and I outlined the extent to which basic rate taxpayers will benefit. His belief that only the rich benefit is wholly wrong, as it is in the case of tax relief on mortgage interest. The measure brings private health care within the reach even of non-taxpayers for the reasons we have discussed in the past few minutes.

Dr. Lewis Moonie: Can the Minister estimate the number of people on the basic old age pension who will take out private health insurance after this generous scheme comes in?

Mr. Major: We shall have to wait and see. But I can tell the hon. Gentleman that any pensioners who do that will find that the tax relief reduces their premium by the standard basic rate of taxation—currently 25 per cent.—in precisely the same fashion that I have set out. Therefore, the hon. Gentleman may be surprised at the number of elderly people who will take advantage of the measure. The cost of a budget policy for someone between 60 and 69 would be £240 a year. That is a budget scheme and would vary with individual insurance companies. That £240 is before the deduction of the sum covered by the tax relief.

Mr. Dobson: Will the Minister give way?

Mr. Major: I am not keen to give way to the hon. Gentleman who has been chuntering like a clown throughout most of our proceedings.

Mr. Dobson: Only from a sedentary position.

Mr. Major: The hon. Gentleman is sometimes more funny than he is wise.
It is completely inaccurate and outdated to suppose that only high earners have private medical insurance, in precisely the same fashion that home ownership, largely thanks to Conservative policies, has long ceased to be the privilege of the few. About 5·5 million people—one in 10 of the population—are now covered by medical insurance, many of them through company schemes. Even trade unions are arranging group cover for their members, for, unlike the Opposition, they believe in the principle and practice of private medical health care and I have no doubt that their members, once retired, may wish to take out their own policies and benefit from the tax relief that is offered to them.
There is a further point. The type of insurance cover most generally marketed to older people, and which they are most likely to find attractive, is so-called "budget" cover. The very much lower premiums reflect retired people's priorities. For example, someone who has retired will be willing to have his non-acute operation at an off-peak time for the hospital at a lower cost. Tax relief will bring just that type of low-cost cover within reach of even more people than the 600,000 people over 60 already covered.

Mr. Dobson: Is it not true that a number of the so-called budget schemes make themselves cheap by giving pensioners a certain amount of money provided that they can find treatment at a National Health Service hospital within six weeks? How will that save money for the National Health Service?

Mr. Major: The hon. Gentleman overlooks the fact that cash schemes are not generally covered by the tax relief, but if there are any exceptions we shall look into them.
I recognise that some hon. Members may be opposed to any tax relief, not on the grounds advanced by the Opposition, but on general fiscal policy grounds, because it contradicts strict tax neutrality principles. It does. I agree with that and there is no point in not recognising it and acknowledging it, and I do so. But we have never pretended that it is our policy to remove all tax relief


regardless of merits. Each is considered individually. My right hon. Friend the Chancellor made clear in 1984, when he introduced his first tax reform Budget, that he had no intention of removing all tax reliefs in the tax system. That is not our aim.
It is true that the general presumption is in favour of fiscal neutrality, but in practice there will always be room for some carefully-considered and limited tax incentives to meet particular needs. That is why we have introduced a number of reliefs, such as those for profit-related pay and personal equity plans, which are specifically designed to make the economy more flexible. The new relief that we are introducing for health insurance is fully justified on merit, as it is well directed at a particular problem, will increase take up and have wider benefits.
I referred earlier to the limited nature of the relief. I should make it clear that there are two restrictions on the relief apart from that imposed by the age of the insured person. First, the relief will be due only to people who are resident for tax purposes in the United Kingdom.
It is axiomatic that a tax relief should not be given to people who put themselves outside the scope of normal United Kingdom taxation. Furthermore, by and large, people who are not resident in the United Kingdom do not use the National Health Service on a regular basis; thus, encouraging them to take out medical insurance would do little to relieve pressure on the NHS. They will not therefore qualify for relief.
Secondly, the clause provides for relief to be withdrawn in certain circumstances. That is where, for example, tax relief has been given when it was not properly due, or when it was given in respect of a contract that has ceased to be eligible for relief, perhaps because its terms have varied. In those circumstances, it is right that no further relief should be given and that any excessive relief should be paid back as speedily as possible.
I hope that hon. Members will now understand what caused us to bring this measure before the House and I hope too that they will appreciate that for many elderly people this new tax relief will be widely welcomed for a considerable period.
I understand the concerns of hon. Members about this relief, but I must say bluntly that I do not share them. This modest measure will give the double benefit of peace of mind to those who are able to take up private medical insurance as a result of it and an increase in flexibility in the provision of health care, which can only benefit the National Health Service and the community as a whole. Those are both desirable policy objectives, so I invite the Committee to reject the amendment and to support the principle enunciated in clause 1.

Mrs. Alice Mahon: I come to the debate with some experience in caring for the elderly in the National Health Service, because I spent 10 years of my life doing that. I also come to the debate with some trepidation. As with the elderly, every time the Government talk about improving the National Health Service, I feel some fear because in this debate, as in every other in which we see the Prime Minister's hand, we have to fight to preserve some part of that precious service. We have been in the battle of images versus the reality of the National Health Service since the Government came to office. The National Health Service is anathema to the Prime Minister. She hates it

because it is a Socialist concept for which she has no time and it means caring for people collectively. I believe that it is a good and decent principle to want to care for the elderly.
I recognise the importance of this debate, and I do not under-estimate the dangers in the move towards tax relief for elderly people who take out private insurance. That will do nothing to help the vast needs of the elderly and I want to talk especially about the elderly in Calderdale. As my hon. Friend the Member for Dunfermline, East (Mr. Brown) said, the proposal has nothing to do with cost, because it is far more expensive to perform operations in the private sector and it has nothing to do with planning, in terms of surgeons' hours, nurses' time and the contribution of the Health Service workers. But the proposal has everything to do with the political will to get rid of the National Health Service or at least to weaken it seriously.
In Calderdale, my local health district, there are 36,400 pensioners. I should add that Calderdale covers my constituency and the constituency of Calder Valley. There are 10,000 pensioner households; one in four of all Calderdale households is a pensioner household. The number of over-75s in Calderdale increased by 16 per cent. between 1971 and 1981. We have the highest proportion of over-75s of any urban authority and the number of over-75s is expected to rise by one half in the next decade. You will appreciate, Mr. Hogg, why I am so concerned about what will happen to those many elderly people.
I obtained some of those figures from my local council and some from the Government. Over 5,000 of the 20,000 pensioner households receive some income support, so they are in the very lowest income bracket. Only about one third of all pensioners pay any tax. The national figure from the Government's 1986 general household survey showed that only 4 per cent. of people over 65 had private medical insurance. If that figure is applied to Calderdale, only approximately 400 pensioners out of 36,400, would benefit from the proposal. That gives us an idea of how few would benefit from the Government's tax relief.
The Chief Secretary has said that some people on low incomes, who are not in the tax bracket, will be able to purchase one of the budget schemes at about £250 a year. Again, we see the battle between image and reality. The Chief Secretary and the Government know that those people are struggling to make ends meet and that the last thing they are likely to do is pay £250 in health insurance —unless, of course, the Government are successful in frightening them into doing so.
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This tax relief measure will do little for the 36,400 pensioners in Calderdale district health authority. It will do nothing to help with the vital resources needed by the National Health Service. It will only help the private sector to leech off even more from the National Health Service than it is doing now. Already, the private sector is causing parts of the National Health Service to bleed to death.
The Government's policy on care for the elderly is relevant to this debate and, in some ways, that policy has been rather sinister. Over the past 10 years, we have seen a massive shut-down of long-stay beds for the elderly and a huge increase in private beds for the elderly. Billions of pounds of taxpayers' money has been pushed into the private sector, and care for the elderly is deteriorating. We have seen the massive institutionalisation of elderly


people. More and more elderly people have found themselves without adequate community care or caring relatives and have been forced into private homes. We have seen entrepreneur after entrepreneur jumping on to the granny gravy train as the Government encourage the waste of taxpayers' money.
I am deeply concerned about what will happen to the elderly who are frightened into taking out private health cover. What will happen when the insurance companies keep rewriting the small print, as they inevitably will if more elderly people take up the so-called "offer"? We shall see insurance companies redefining what is medical, as happens now when authorities seek excuses to close down long-stay beds. We are moving towards the conditions prevailing in the United States, where elderly people believe that they are going into hospital under private medical cover for acute operations but, as often happens with people over 75, that acute condition becomes chronic.
We shall see hospitals wanting to dump patients quickly whom they see as financial burdens. We shall have the dumping referred to in the excellent booklet by my hon. Friend the Member for Peckham (Ms. Harman), "Your dollars or your life". It should be compulsory reading for Opposition Members. Sixty per cent. of elderly people aged between 65 and 74 have long-standing illnesses. The image of them nipping into hospital, having a conveyor belt operation and nipping out again under a cheap private insurance scheme is nonsense.
I have challenged the Minister on this subject, as only 400 of the elderly people in my health authority area are likely to derive any direct benefit from the proposal. To care for the elderly, the National Health Service needs a massive injection of cash. The £40 million that the proposal would cost would be a start, and if the Government could see their way to increasing that on a weekly basis for the next six months, we might see a return to properly funded health care.
If we are to help the elderly, we need to spend more on chiropody, physiotherapy, occupational therapy and intensive home care packages to keep elderly people in their own homes and to help them not to become chronically sick.
As my hon. Friend the Member for Dunfermline, East said so clearly, the measure will serve only to move us towards a more divided service for the elderly. It is being pushed upon an unwilling nation by a Prime Minister who is hellbent on getting rid of the National Health Service.
A warning was sounded last week in the Vale of Glamorgan, where the Labour party achieved an excellent result. I know that the Chief Secretary is an ambitious Minister and that, like many of his colleagues, he tries to curry favour with the Prime Minister because she is king-maker at the moment, but I warn the right hon. Gentleman that he will be sounding his own death knell if he proceeds with proposals that have nothing to do with helping the elderly and everything to do with destroying the National Health Service.

Sir Peter Hordern: I am not very happy about the clause, but before I give my reasons I want to say something about the speech made by the hon. Member for Dunfermline. East (Mr. Brown). The hon. Gentleman said that, under the clause, the queue would be subsidising the queue-jumper. I think that that encapsulates the Opposition's view of taxation. The hon. Gentleman and his party believe that resources belong to the state, not to

the individual. Let me distance myself immediately from that attitude. Money does not belong to the state and tax relief does not mean giving money to those who are relieved of tax. It means taking less away. In a general sense, that is an important distinction.
The Labour party also suffers from the belief that if Governments take less away from people in tax, they make it less likely that they can increase public expenditure. As this Government's record has shown, however, if one reduces taxes in a general way, one so enhances the country's economic performance that one can increase revenue and so have more money available for public expenditure.
The Labour party believes that we have a static economy and that if we relieve someone of the burden of taxation, it means that there is less available for someone else. In fact, we have a dynamic economy, and our experience of the past 10 years amply proves that point. Everything that I have read about the Opposition's policy on taxation leads me to believe that it is more a policy of retribution than a means of raising revenue for public expenditure.

Mr. John Battle: It ought to be put on record that, taking into account indirect taxation, the people of this country have been taxed more heavily under this Government. It is a myth that the Government have given taxes back; they have increased the burden of taxation.

The Temporary Chairman (Mr. Norman Hogg): The hon. Member for Horsham (Sir P. Hordern) need not feel obliged to respond to that point in any detail if he does not wish to.

Sir Peter Hordern: I am grateful for your protection, Mr. Hogg. Doubtless I need it on other occasions but I do not on this occasion. It is true that indirect taxation has increased, but so has the country's wealth, which has meant that people are more able to bear the burden of taxation placed upon them. Moreover, rates of direct taxation have been substantially reduced. But I shall go no further, Mr. Hogg, because I want to restrict my remarks to the clause and the amendment.
We need as broad a base as possible for taxation. If we are to enjoy the benefits of reductions in taxation leading to dynamism in the economy and therefore to more revenue and more public expenditure, it is essential that there should be as few exemptions from the general level of taxation as possible.
Of course, we have some exemptions from taxation—some special allowances and tax concessions. We have had them for many years. However, I would distinguish those existing tax concessions from the one proposed in the Bill. We have tax concessions to encourage people to take out pensions, for example. That principle has been established for a long time. Some may say that we allow too many tax concessions for the pension industry, and I would number myself among them. We have tax concessions for the members of the property-owning democracy, although I do not think that the limit at which mortgage interest relief is allowed will be raised in future. It has not been raised for several years, so that concession is diminishing as a force, which encourages people in the belief that the Government genuinely think that there should be as little exemption to detract from reductions in direct taxation as possible. Other tax reliefs—for the business expansion scheme, for


example—are designed to encourage more rented accommodation or more industry, and such reliefs also serve a national purpose.
The question arises whether the concession proposed in the Bill makes for the general good and whether it should have preference over others. No one has expressed the matter better than my right hon. Friend the Prime Minister. Some time ago she said that any tax concession for which extra public expenditure is required has to be set against the net income of a nurse. At that time the average nurse's salary was £140 a week, and tax and national insurance contributions amounted to £40 a week. My right hon. Friend said that that was important because any tax concession has to be set against the contribution that nurses make to national insurance and in taxation, and there are a great many nurses. That is a good test, and we should bear it in mind in considering the proposal.
We should look at the evidence to see whether we need to subsidise private medical insurance. I understand that, at the end of 1987, 5·2 million people, including dependants, were covered by private health insurance. There is a distinction between the categories of those covered: 28 per cent. of people in professional classes are medically insured as compared with 7 per cent. of the people at large. The question immediately arises what the deadweight cost of the proposal will be, as the people who are already covered are hardly likely to be encouraged to take out even more cover. More to the point, the cost to the Exchequer is substantially greater than it would have been had a completely new allowance been proposed.
I understand that, overall, the population over the age of 65 is no longer growing. The principal demographic change is among the really elderly, and there is a substantial increase in the number of those aged 85 and above. The total number of subscribers to private health schemes has grown from 1 million in 1977 to 2·2 million in 1987, so the question arises whether the concession is necessary to encourage people to join private health schemes.
For that reason it is necessary to ask those who conduct the schemes what they believe is the position. I shall quote from an article by Barbara Miller that appeared in The Guardian on 12 October 1988, which was, of course, before the Health Service proposals were published. It said:
BUPA, the largest British private health insurance company with 61·7 per cent. share of the market, does not want any major government intervention to help boost the private sector. 'We are not predicting, or expecting, any bouquets from the Prime Minister's review,' says Neil Jamieson of BUPA. 'We want to stand on our own feet and not be supported by measures taken by the Government…We feel very uncomfortable with many of the ideas that have been put forward … We do not believe they are in the broad interests of the British public'.
It is important to note that BUPA, the largest private health insurer, sees no need to give extra concessions or help to the private health sector.
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I accept entirely, as my right hon. Friend said, that those who do not pay taxation will, nevertheless, gain the advantage of a net reduction of the cost of medical insurance. However, does that total reduction overcome the amount required to compensate for the deadweight for existing subscribers? I do not know the calculations, but I believe that the cost of the concession will be some £40

million. I would guess that in the first year most of it will go to those who are already covered by existing schemes. If, however, the scheme becomes more popular, as the Government hope, it will cost much more than £40 million. Then, following the analogy of my right hon. Friend the Prime Minister, we must ask whether that is the best way to use the tax that a nurse pays.
I believe that the top rate of tax of 40 per cent. is a significant achievement and is a credit to my right hon. Friends. However, it necessarily means that those people who now pay a top rate of 40 per cent. are not on the bread line. The whole emphasis of our reforms is that we should stand on our own feet, yet the clause proposes that those already on private health schemes should be helped a little more. Of course, the point could be made that medical treatment is much more expensive for the elderly, but that is a problem that we all face. When the top rate of tax is only 40 per cent., it appears unnecessary to give extra assistance to people joining private health schemes.
Private health schemes are already making considerable progress. I have already mentioned the increased number of people covered by them. I understand that some company schemes already look after their pensioners and that more are proposing to do so, as I believe any good company scheme would aim to do. I wonder why it is necessary to have such an additional incentive when there is a natural trend towards the growth of private health insurance schemes and of company schemes assuming a responsibility for their pensioners.
I would be more prepared to accept the clause if it gave tax relief only to the elderly. Has my right hon. Friend not noticed how many elderly people now retiring have pretty good occupational pension schemes and are very well covered? Of course, by the time they retire, they have probably paid off their mortgage and they could, perhaps, do with a tax concession for their extra needs as elderly people. I can see some force in that argument. However, I cannot see any force in the argument that their children, who may be high salary earners and paying tax at only 40 per cent, should be given maximum tax relief on something that they could well afford to pay for their parents in any event. We must think carefully before we say that it is necessary to give to such a large extent a partial relief for private health schemes to those who could well afford to and jolly well should look after their parents.

Mr. D. N. Campbell-Savours: Will the hon. Gentleman press the Financial Secretary about the deadweight of those already in schemes, who, on the implementation of the Finance Bill, will be beneficiaries? Will the hon. Gentleman press the Financial Secretary to give the proportion of the relief and the projected relief that will be given to such people?

Sir Peter Hordern: I have no doubt that my right hon. Friend will wish to deal with that point, because I have already raised it with him, but I am grateful to the hon. Gentleman.
I understand that the Government have claimed that the relief would help to ease the problems in the National Health Service. Indeed, my right hon. Friend the Financial Secretary made the point on the Second Reading of the Finance Bill that there would be savings—to some extent to a geared degree—because a small relief would allow significantly less expenditure to be made in the National Health Service. I accept my right hon. Friend's point and


the spirit in which he made it. However, if that is correct, we should be thinking of carrying that principle a little further, not just by means of a tax concession, but, if it is as good as that, we should be paying people the marginal rate to opt out of the Health Service. I do not believe that that is a good idea and nor is it a good argument.
If we are concerned about finding the best way to help the National Health Service, I suggest to my right hon. Friend that we ask my right hon. and learned Friend the Secretary of State for Health. I have noticed that my right hon and learned Friend the Secretary of State for Health must come to the House every year—sometimes in the face of great difficulties, which are sometimes caused by my right hon. and hon. Friends—to justify increases in health charges. I have always supported my right hon. and learned Friend when he comes to the House because the poorest are exempt from those charges. The aim of the charges is to raise some direct payment from those who can afford to pay. However, the essence of this relief is that, while there should be some small relief for those who do not pay tax, the largest element of relief will go to those on very high earnings. Therefore, we have a complete contrast between the position of my right hon. and learned Friend the Secretary of State for Health when he comes to the House concerning health charges and that of the proposal in the clause, which will give substantial relief to those who can well afford to make the arrangements in any event.
If the aim of the clause is to ease the burden on the National Health Service, it would be best left to my right hon. and learned Friend the Secretary of State for Health to decide how the money might be used. We must also bear in mind that tax concessions make people think that there is some virtue in opting out of the National Health Service, which is a view I do not share. If we persist in that view, it is the surest way to cause people to regard the Health Service as some form of second-rate service. I do not believe that that is wise or accurate.
If it is right to have tax concessions for health, there is a short distance to go before we shall be asked for tax concessions for education in the form, for example, of private education vouchers. That is something with which I would not agree. Unfortunately, we have got ourselves on a slippery slope and I for one am not prepared to go down it.

Mr. Peter L. Pike: The hon. Member for Horsham (Sir P. Hordern) made some valid points in his contribution to this important debate. Although I do not intend to follow his line, he pursued well thought-out and important principles. At the end of his speech he said that he feared that the moves in the Finance Bill, and especially in clause 51, could set a dangerous precedent. I know that when the Minister speaks later in the debate he will deny that and say that the Government have no intention of moving in that direction in regard to health, education or similar areas. However, many people know that once the Government have started to move in a certain direction, subsequent years see further moves. Therefore, it is absolutely right that we should be concerned and somewhat fearful about the direction in which the Government intend to go.
I support amendment No. 5, moved by my hon. Friend the Member for Dunfermline, East (Mr. Brown), which delays the implementation of the provisions of this clause until 1993. The clear intention is that the provisions will be

the subject of debate in a general election and that after being elected the Labour Government will say that we do not believe that that is the direction that we should take.
In the first part of my speech I shall say why I disagree with the principles of the clause and I shall then turn my attention to the ways in which the money that we are discussing could be more widely used by the Government in the intervening three years from 1990 to 1993.
The Minister referred to £40 million, but he cannot be absolutely certain about the figure. Although I understand the reasons why he canot be certain, that makes this provision even more of an open cheque or an open encouragement. Some sons and daughters will, of course, take out health insurance for their elderly parents or for other people in their family, but not knowing exactly what figure we are talking about is dangerous.
If this proposal goes through and the Government do not heed the warnings, I accept that the right principle on which the provision should be carried out is on a MIRAS-type basis, which would benefit those pensioners who do not pay tax. However, I remind the Chief Secretary that the MIRAS principle was an extension of the option mortgage scheme that was originally introduced by the 1964–66 Labour Government to extend the tax concession that was then not available to people not paying tax to those at the lower end of the income scale. That welcome move ultimately developed into the MIRAS scheme as it now exists. If the provisions have to go through, such an underlying principle would be absolutely essential.
The clause would give assistance to those people who least need it. Ultimately, it is the pensioners or the relatives of the pensioners with the highest incomes, especially those paying tax at the highest rate, who will get the biggest benefit from this proposal. I am always amazed that the, Government continually give any money or cash that is available to those who least need it and to the people who have most to start with. As evidence of that one need only look back to 1979, to the Government's first Finance Bill after the general election, when they reduced the standard rate of tax by only a small amount, but in effect gave a substantial amount to the people paying the higher rates of taxation. That trend has been evident in every Budget since.
Upratings of pensions now take place in April—at almost exactly the same time as the Government produce their Budget. As that is so close to the Budget, people on benefit and at the poorest end of the income scale are justified in relating what is being given in the Budget to those who least need help to what they are receiving in their benefit increases.
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If the Minister really wanted to introduce a provision to help the elderly, instead of going ahead with this proposal, which is of benefit to some but not to those who most need it, it would be far better to give something to those 200,000 pensioners who received no increase in the April uprating and to the 300,000 who received only a partial increase. Some of the pensioners at the bottom of the scale will not receive any increase in their pension in next year's uprating. The Chief Secretary fully understands the reason for that. The pensioners who were on supplementary benefit before the major changes in the social security system in April 1988 then went on to income support and were not entitled to as much in income support as they had


received under supplementary benefit because the new system is far meaner and far tighter. Many people lost a lot and, although certain people were given protected payments, those protected payments were to be eroded against any future increase. Therefore, next April for another year in succession, some people will not receive any increase in the amount of money that they receive from the state in their benefit payments. They will realise that at the same time the Government are giving at least £40 million in possible tax concessions to those people who are able to take out private health insurance. I am sure that people on benefit will feel that that is not right.
I do not intend to go too far along this line because on Thursday of this week we shall be having a major debate on the National Health Service review. I am sure that many, if not most, of our pensioners would prefer to see the Government move in a much more positive direction over the National Health Service instead of adopting the nonsensical and destructive approach of the review of which many people are rightly fearful. I know that hon. Members of all parties have been inundated with mail on this subject, especially from elderly people who fear an erosion of the Health Service.
One thing about which such people will be most fearful is that provisions to encourage private health treatment represent a split and a division in the Health Service and give a better opportunity for treatment to those who are able to pay. The hon. Member for Horsham said that he did not believe that the Health Service was second-rate. I know that he fully believes that and that he will be one of those who will fight to ensure that the National Health Service always maintains its status in terms of the type of treatment that it can give.
However, we must recognise that, whatever the clause provides in the future, the majority of elderly people will still depend on the National Health Service for their treatment and they are rightly concerned about what is happening. To some degree, this proposal, running along-side the National Health Service review as it does, proves our point that the Government are determined to break up and to destroy the principles of a National Health Service that is based on need and not the ability to pay. That is worrying.
The district health authority in my area is proposing to close yet another hospital. It will be the third in the past three years. Hartley hospital and Victoria hospital have already been closed and the district health authority is now proposing to close Bank Hall hospital for the care of the elderly. Although the health authority has not published its consultation document, admissions have already been stopped. That means that by the time the consultation exercise, which must be carried out, is completed, we will be faced with a fait accompli. Yet even now we have insufficient accommodation for elderly people in the National Health Service within our district. We know the detail of the consultation and we know that it will show that in future there will be less provision for the elderly and for those who need to remain in hospital care. The proposal will not help.
I have raised the following matter in Health Service debates and it ties in with the question of taxation. I wonder why people who pay for private treatment, who are not necessarily covered by insurance, often have to pay

in cash. It is extremely common in my constituency for patients to be asked to pay cash. That is not because the people running the private hospitals think that the chance of the patient's recovery is not good and that, therefore, they will not otherwise receive the money. The reason is that the full amount paid is not shown and, therefore, tax is not paid on it. The Minister might well look at that issue rather than pursue the policies outlined in clause 51.
One of my constituents recently paid £1,000 cash for a cataract operation. He went against his principles but his wife was elderly and he was more worried about her and, in the end, he paid cash. He was asked to go to the hospital with not a cheque or banker's draft but cash.
The proposal is wrong. It will help only those who, in the main, can secure private treatment. If people have the money and the choice is there, it is their right to exercise that choice. However, it is not for the Government to give a tax concession to encourage more and more people to do so. They should put that money into the Health Service and tell the Secretary of State for Health that money is available to be spent in that way.
If the Government are successful in carrying the clause, they will give away at least £40 million. If they are prepared to do that, I can make some useful suggestions as to how they could put the money to better use. They could put it into the Health Service, which is important. The problem in the Health Service is not how it is run but the lack of resources, which could be made available. If the water industry were to remain in the public sector, the problem would be not who owned it, but the lack of money made available by a Government who have the resources to invest in it. They cannot keep talking about what happened pre-1979 because they have been in office for 10 years and must accept responsibility for what has happened.
My own authority receives less money for housing from the Government than it did prior to 1979. Therefore, the improvements to old council houses have slowed down and, despite the community refurbishment schemes and the extra little schemes of which the Government are so fond, the authority still receives considerably less money from the Government. One programme that we designed to improve the pre-war council houses should be coming to completion now, but it will have to run for at least another 10 years because the resources are not available.
The Opposition tend to get abused by people who say that our main concern is public sector housing. That is not true. We are just as concerned about problems in the private sector. There as a bonanza of grants up to 1983 but, having won the election in October, the Government announced a cutback. Money could be made available for grants and the improvement of older housing in certain parts of the country. When people apply for repair and improvement grants, they never obtain them because the councils never receive the cash from the Government. I know that my hon. Friend the Member for Halifax (Mrs. Mahon) has experienced the same difficulty with older terraced houses on her side of the Pennines. Such houses could be improved because they are basically good houses, yet councils are unable to provide the money for doing so.
My own local authority has had to target just three areas—Leyland road, Hart street and Eliza street—because it could not deal with the borough as a whole. It had to stop repair and improvement grant applications in March 1984. Therefore, it will never be able to meet the demands of a mass of people who are in the pipeline. The


Government have thrown an extra £200,000 into private sector area renewal schemes, but that is chickenfeed. If the amendment were to succeed, part of the £40 million could go towards housing problems. The HIP allocation in Burnley was £2,250,000 for 1989–90 and it has received a few additional payments on top of that, but the projected programme needed an expenditure of £11,075,000 to deal with the problems.
Lancashire county council faces a problem with schools. We have chased the Government year after year. They could give a bigger allocation for schools in 1990 because they are prepared to give this tax concession from April next year. Instead of giving that tax concession, they could give the money to local authorities to spend on schools. I have had to battle for several years for schools to be included in the programme because the council has received only a fraction of money that it has sought from the Government to bring the schools up to standard. The standard of school building affects the education of the children.
Even though some schools are now included in the programme, problems still exist at Walshaw high school, Briercliffe primary school, Casterton Avenue primary school, Rosehill infants school, Gawthorpe high school, which needs an additional science laboratory, and Barden high school, which needs a home economics unit. It would be far better for the Government to spend money on those schools than to assist pensioners who do not really need help and who should be able to receive the treatment that they need. We want them to have the finest treatment from the NHS because they are entitled to that.
We are still awaiting the Government's response on the important issue of community care—

The Temporary Chairman: Order. What the hon. Gentleman says is immensely interesting, but it is important that he confines his remarks to the amendment that we are debating.

Mr. Pike: I was explaining how the Government could use the £40 million if they were prepared to accept the amendment. I am always helpful to the Government and would not wish them to be embarrassed if the amendment were carried tonight and they did not know what to do with the £40 million next year. I have been extremely helpful to them in that respect. However, I recognise and understand the constraints upon us. I could have made the same argument about the roads in Lancashire.
I shall return to the principle involved in the clause, which is leading us in the wrong direction. We want our elderly people to receive care under the National Health Service. We therefore believe that the Government should not give tax incentives to take people out of the NHS. They want to do that only because they are determined to cut the NHS and want to put a foot in the door and drag it down. That is the basic and fundamental reason why this proposal is contained within the Finance Bill.
Clause 51 is not designed to help the pensioners, although a few will benefit. It is designed to make another chip in the Health Service because the Government recognise that the one last remnant that shows that Socialism can work in this country that they have failed to destroy is the National Health Service. I hope that when it comes to the vote, hon. Members will recognise that the clause is nonsensical and that the amendment should be carried. The clause should be deferred for three years.
If the Government believe that they are right, let them test their opinion at the next general election. Let the people decide. The proposal was not in the Government's manifesto. If they receive a mandate at the next election—I am increasingly convinced that they will not—let there then implement the proposal. The Government should accept the amendment and put the idea to the people of the country.

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Mr. Quentin Davies: The matters before us are of considerable importance. I listened with great attention to the arguments of the hon. Member for Dunfermline, East (Mr. Brown), but I was conscious of growing surprise. He is an experienced Member and passes in some quarters as an expert in financial and fiscal matters. The drift of his argument seemed to be that there was complete equivalence between a Government allocation and a tax relief—between a Government decision to increase its Budget in favour of a particular purpose or actively and laying aside a sum that would be forgone in the form of a tax relief to benefit the same activity or purpose.
The hon. Member for Dunfermline, East appeared wholly ignorant of—or pretended to be ignorant of—one of the cardinal principles of fiscal policy: the gearing effect of tax relief. If the Government decide to increase the allocation to a particular activity by £1 million, the incremental resources directed to that activity are £1 million. If the Government decide to forgo £1 million in tax revenue by establishing a tax relief for that activity, and if the taxpayers who benefit from that relief pay tax at a marginal rate of, say, 40 per cent., the incremental resources that will flow to that activity will be £2,500,000—a substantial difference.

Dr. Moonie: The money will be paid to the insurance companies, not to the individuals. It has nothing to do with a tax allowance—although people will pay less out of their own pockets, so the hon. Gentleman's argument is spurious. Government money through the MIRAS scheme will be paid directly to insurance companies such as BUPA, not to the people concerned, so it does come out of taxation.

Mr. Davies: That makes no difference. The point is that a tax relief is established which creates an inducement for people to spend more money than they otherwise would on purchasing particular goods or services. The particular mechanism whereby they purchase, and the intermediaries who may be involved in the purchase, do not matter. They are entirely immaterial to the economic or fiscal arguments involved. So I must reject the hon. Gentleman's intervention.
I return to the important question whether the hon. Member for Dunfermline, East was as ignorant as he pretended to be of the cardinal principle of fiscal policy to which I have referred—the gearing effect of tax reliefs. We discovered the answer to that question during his speech. My hon. Friend the Member for Gillingham (Mr. Couchman) reminded the hon. Gentleman of this principle. Then the hon. Member for Dunfermline, East made another extraordinary statement. He said that in this case the administrative costs of BUPA or PPP or the. Provident or other health insurers will more than take up the additional resources that the gearing effect will


generate. So the gearing effect will be discounted or compensated for or negated by the high level of administrative costs.
Again, I ask myself whether the hon. Gentleman really believed what he was saying, and whether he expected the rest of the Committee to believe it. Does he really believe that the administrative costs of BUPA and PPP are 40 per cent. of their turnover? We had an interesting opportunity to discover the answer later in the hon. Gentleman's speech, when he mentioned the administrative costs that these health insurers generate—10 per cent. So the hon. Gentleman did not believe a word of his own argument.
I greatly resent and regret what the hon. Gentleman offered us today; it was an exercise in deliberately cynical disingenuousness and predetermined humbug.
The story does no stop there. The contradictions in the hon. Gentleman's speech went on and on. I am not in a position to say with certainty whether they were deliberately disingenuous or involuntary. Being an easygoing sort of person, well prepared to give colleagues the benefit of the doubt, I am perfectly prepared to believe that these other contradictions, unlike the one to which I have referred, were merely the reflection of weakness of reasoning or confusion of mind—

Ms. Diane Abbott: rose—

Mr. Dennis Turner: rose—

Mr. Davies: Perhaps it might be useful to consider one or two of the other glaring contradictions in the speech of the hon. Member for Dunfermline, East. He complained at one point that the tax offset that the Government propose in clause 51 was not capped. A few moments later he complained that this tax relief would generate no material savings for the NHS. He cannot possibly have it both ways. By definition, to the extent to which the utilisation of this tax relief is capped, the benefits and savings to the NHS will be reduced.
The hon. Gentleman complained vigorously about the deadweight. If this tax relief were not used to any great extent by new people subscribing to private health insurance, the deadweight cost would remain a relatively high, possibly a very high, proportion of the total cost of the relief that the Government are proposing. However, to the extent that the take-up is greater, the deadweight costs will fall as a proportion until they may become minimal, negligible or altogether non-existent. So the argument is untenable.
I am flabbergasted that an experienced Member such as the hon. Member for Dunfermline, East should attempt to argue in the course of the same speech that a relief should be capped and then complain about the deadweight cost.
The hon. Gentleman has done a great disservice to the Committee, and I am sorry that such an unfortunate example of a parliamentary speech should have begun the Labour party's contribution to its proceedings. I hope that the hon. Gentleman will think long and hard about his speech this afternoon and decide in the interests of the dignity and credibility of his party—if in no higher interests—that he will at least display slightly more respect for his audience inside the House and beyond it as the

deliberations of the Committee continue. If he feels in need of it, he should without delay arrange to take a crash course in elementary logic.

Mr. Denzil Davies: I need not comment on the speech of the hon. Member for Stamford and Spalding (Mr. Davies) because, frankly, most of my hon. Friends—and I suspect many of his hon. Friends—found it incomprehensible.
Amendment No. 5, which we are discussing, is linked with No. 8, which I tabled. Mine is a technical amendment on which I will not dwell. However, I must, for the record, point out that it should read:
Clause 51, page 39, line 45, leave out from 'claim' to 'deducted' in line 46 and insert 'set off against its profits liable to tax on the amount'
rather than just "tax the amount". It was obviously a printer's error.
My hon. Friends and I, and some Conservative Members, oppose the clause for two reasons. First, we do not accept that this is the best way to spend £40 million, or whatever the sum might be. We appreciate that it is a figure that the Treasury or Inland Revenue has plucked out of the air. It is difficult to estimate sums of this kind because the ultimate figure will depend on the demand and what happens after 1990. Indeed, it could end up being £200 million. As the hon. Member for Horsham (Sir P. Hordern) said, if £40 million is available, it had better come out of the DHSS rather than out of the Inland Revenue and the Treasury for the NHS.
On Saturday I was in my local advice centre, as many other hon. Members must have been in theirs. I discovered that the waiting time to see a consultant dermatologist in the Llanelli area is two years from the time of referral by a local GP. That is due to the shortage of appointments of consultants in dermatology, which is to some extent a Cinderella service.
My hon. Friend the Member for Dunfermline, East (Mr. Brown) said that £40 million would pay for 1,000 consultants. In my constituency I need just one extra consultant in dermatology. That would be of far more benefit to the NHS in my constituency than the amount of money that will come back to those of my constituents who can afford to take up this so-called tax relief.
My constituents must wait three years for a hip replacement operation. In other words, in my constituency I need two more orthopaedic surgeons. That would be of more benefit to the NHS and the elderly in my area than what is proposed in the clause.
We know why the Government are taking this action. The Prime Minister wants a two-tier health service. She does not believe in the NHS. She could not get her way entirely with the changes that she wanted to make, so she rushed off to the tax system. I admit that Governments of both parties have sometimes rushed to the tax system when they have been unable to solve their problems and get their way by some other means.
The second reason why Labour Members, and some Conservative Members, especially the hon. Member for Horsham, oppose the clause is that we believe that the tax system should not be used for what was once described as social engineering. We used to hear speeches from Conservative Members—not from the present Chief Secretary; he was not around in those days—including the present Chancellor of the Exchequer and the Financial Secretary, about the evils of social engineering. Of course, they were in opposition at the time. Certainly


Governments are not supposed to use the tax system to advance a philosophy or ideology. The tax system is supposed to be neutral and to raise money for the Government. Governments must achieve their aims by other means—by changing structures rather than by using the tax system.
Conservative Administrations have been involved in more social engineering than have most Labour Governments since the war. I well remember the enterprise zone concept introduced by the former Chancellor of the Exchequer, now the Foreign Secretary. That was a bit of social engineering, and it has not worked. The Chancellor needs to encourage savings, and social engineering includes, for example, PEP schemes and unit trusts and the tax reliefs that are given to people to invest in schemes of that kind.
There are many other examples of social engineering. We are debating one such piece of social engineering now; the Government are trying to achieve something in which they believe ideologically and they are trying to achieve it through the tax system.
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What the Government propose is all dressed up as a contract of insurance, but as I read the legislation, if an elderly person wishes to have one operation—my hon. Friend the Member for Burnley (Mr. Pike) referred to a cataract operation—presumably it will be necessary for that person simply to take a sum of money to an insurance company, buy what is called a premium and then get the operation that is required.
That is a veneer. The Government are giving tax relief to buy services with money, although they are talking about health or medical insurance. It seems that it will be possible to make one payment, for one premium, and exchange that for a contract, and presumably after the one operation has been achieved, that will be the end of that piece of medical insurance. That is my understanding of how it will work. That is buying services and getting tax relief for the purchase. That is the wrong way to use the tax system. It is also dangerous because it could lead to all manner of other pieces of social engineering.
The hon. Member for Horsham made the fair point that, with a top tax rate of 40 per cent. and a basic rate of 25 per cent., there is no justification for tax breaks or tax reliefs. The Government take much of their radical Right philosophy from the United States, from the Reagan followers. In fairness to President Reagan, he took a Bill through Congress under which he reduced the top rates of tax and wiped out most of the tax breaks and tax allowances.
The Prime Minister likes to follow the American system, but she cannot bring herself not to use the tax system for ideological purposes. The logic of her philosophy would have been not to have tax reliefs. Then the Government could have reduced the top tax rates to 40 per cent. That would have made sense. Mortgage interest relief is another example of that. To try to have it both ways—a lower rate of tax plus the reliefs that they propose, which go to those who pay at the top rates—represents an unfair, unjust and unnecessary use of the tax system.
In connection with the somewhat esoteric amendment that I tabled, which has not been selected, I understand that most organisations such as BUPA and PPP are taxed as provident associations. I gather that they are not

charities. I do not know whether they pay tax, and perhaps the Minister will say if they do. I appreciate that he is not permitted to go to the Inland Revenue and examine people's tax affairs, but presumably organisations such as BUPA publish accounts.
My amendment was designed to ask whether, if such organisations do not pay tax, they can still claim back the tax which has been deducted in the MIRAS scheme. Presumably they can. That is unusual, since if they have no profits on which they pay tax, they are like charities; they simply claim a subsidy from the Treasury. So it is nothing but a subsidy.
My understanding of the tax system is that normally the Revenue pays tax back—if, of course, one is paying tax on one's profits. But if one is not paying tax on one's profits, there is no real case in tax logic to reclaim the tax. If I am right, then this is a clear and straight subsidy, and there is no justification for it.
The clause goes on to deal with qualifying individuals and insurance companies. My reading of the provision leads me to believe that a company doing business in the EEC would be a qualifying insurer for this purpose. The company does not even have to be resident in the United Kingdom, or even to trade here. Does that mean that, if an elderly person takes out a contract of insurance with a German medical insurance company, the Inland Revenue will send a chunk of money to Germany? Presumably the same would apply to a company in France or in any other EEC country.
May we be told whether that is the case and, if so, why it is necessary? It appears to have been necessary to include a provision to apply the provision not only to insurers in Britain but to insurers in the EEC as well. I would not have thought that there was a Community directive to that effect. Do I gather from the look of amusement on the Minister's face that there is such a directive? Are the hands of the Government tied in the matter? In other words, we are not talking about £40 million going to the British health system, as Ministers like to call it; it seems that much of it will go across the exchanges to other countries.
It is extraordinary that a business operating in Europe, paying no tax in Britain, should receive a tax subvention from the Inland Revenue. I take it that that is what will happen from the way in which the Financial Secretary was half-smiling in anticipation of that question.
Clause 51 is unnecessary. It will hinder, not help, the NHS. A little of the £40 million that is available could be spent on providing more consultants. That would not be inflationary. It would not hurt the balance of payments more than it is hurt already. It would not lead to a surge of imports. As the hon. Member for Horsham said, that money should be spent on the NHS through the DSS, the Welsh Office and the Scottish Office, so that once again we can make our Health Service the best in the world.

Mr. Matthew Carrington: Tax breaks are always hard to justify. It is difficult to introduce more tax concessions into our tax system and to maintain the essential elements of a fair, just and equitable taxation system. However, the introduction of tax relief on medical insurance is a small change. It can be justified because it removes an injustice presently experienced by those who, on retirement, find themselves cast out of insurance schemes because they can no longer afford them. This is a minor measure, but it rights a wrong. Like other tax concesssions, it brings greater justice into our fiscal system.
As private medical insurance expands, more and more people receive the benefit of such insurance from their companies. Often, they are not highly paid and so will not benefit from a large pension. When such people leave their employment they find that the benefits that went with it cease. Those who once enjoyed the benefits of private medical insurance will find those benefits withdrawn.

Ms. Abbott: The hon. Gentleman talks about private health insurance being withdrawn from the over-60s as though that were an act of God. Is it not the case that private insurers withdraw such insurance from elderly people because there are no profits to be made from it? If the hon. Gentleman is worried about justice, he should be writing to those private insurers. Is it not the nature of a system run for profit that the elderly will not be covered?

Mr. Carrington: The elderly frequently are covered. That is exactly the point.

Ms. Abbott: One per cent.

Mr. Carrington: Private insurance companies will frequently continue cover provided payments are made by the person insured. As long as the cover is continuous, elderly people find it perfectly possible to obtain cover and are encouraged to do so by many private insurance companies. The problem comes when there is a break in that cover because, at the point of retirement, they can no longer afford to pay the premium. That is the problem that clause 51 is trying to address.
Another good justification for giving such a tax concession is that it seeks to ensure that private medical insurers can afford to address the problem of the elderly. They do that by building up the number of elderly people with medical insurance to a point at which it becomes self-sustaining because the number of people benefiting from it justifies the effort being made by the insurance companies to provide cover.
Clause 51 is justifiable and highly beneficial. The amount of money involved is small; £40 million is about one tenth of 1 per cent. of the annual expenditure on the Health Service and is only a small proportion of Britain's annual health budget. Consequently, the cost to the Exchequer is small compared with the total amount paid out by taxpayers in providing medical cover for the nation.
An additional benefit is that this measure will encourage the growth of private medical care. People will realise that by joining such schemes or by encouraging their employers to join such schemes, they will be able to obtain cover throughout their lives and not simply up to retirement. As more people are encouraged to join such schemes so more employers will be encouraged to provide them.
The growth of private medical cover is beneficial to the whole of society, not just to those who obtain it. It is good for a number of reasons. To start with, it provides choice. People who wish to have such choice, or who work for employers who wish to provide them with that choice, will be able to say where they want to obtain their medical treatment. That introduces competition which benefits the NHS as well as the private sector.
Many changes in the NHS in the attitude towards patients and the way in which they benefit from hotel-type services—we see this particularly in London hospitals—

are a reflection of the much higher quality of care provided by private hospitals. Our NHS hospitals have recognised that they must match that service in order to meet the requirements of the patients.

Mr. Turner: Will the hon. Gentleman answer one simple question? How would the hon. Gentleman's analysis about patient choice, freedom and opportunity affect a person knocked down in the road tonight or a person suffering from a more common ailment such as appendicitis? Would not such people simply ask to be taken to a hospital to have their needs attended to? Is not all this an aberration—

The Temporary Chairman: Order. The hon. Gentleman's intervention is becoming a little lengthy.

Mr. Turner: I shall bring it to a conclusion, Mr. Hogg. Thank you for your forbearance.
Should we not be working to build a Health Service for all, irrespective of means, so that all have the choice of good medicine and service wherever they are?

Mr. Carrington: The competition created by the private medical sector has been important in changing what happens to such a person when he or she arrives at hospital. In the past, hospital waiting areas were dingy and over-crowded, not, to use the current jargon of the Health Service, user-friendly.
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What is now happening is that our major hospitals in London are changing the patient areas inside the hospitals to bring them more up to the standards regarded as usual in the private sector. That has been a reaction to the standards which have been shown to be perfectly possible and affordable within the private sector. It just took the extra effort and the private competition for the National Health Service to do the same. I believe that competition does nothing but good for the whole level of health care across the country and that the encouragement of that standard of health care is to everybody's advantage.
One point that is very important and seems to get lost quite frequently in the discussion of private medical insurance is that private medical insurance cannot, is not, and never will be in the foreseeable future a substitute for the National Health Service. It does not pretend to be and, particularly for the elderly, never could be. I am not advocating that it should be and this clause does not propose that it should be. What happens now with medical cover is that it takes out the smaller operations and minor, more routine treatments which otherwise would clog up the NHS. It does not attempt to cover long-term care and should not do so. It is an add-on to the NHS; it does not pretend to be a substitute for it.

Ms. Abbott: Is it not the case that in practice private medicine is a terrible drain on the Health Service? Is it not the case that the private sector trains no nurses and that every nurse who works in the private sector has cost our Health Service £10,000?

Mr. Carrington: Private medical care is often a great benefit to the National Health Service in making it possible for the NHS to go to private hospitals and relieve the load with which it would not otherwise be able to cope. That is extremely beneficial. For the elderly to be able to get the minor treatment they need and to pay for it themselves and not be a drain on the NHS is to everyone's benefit. It frees


up the care which the Health Service can then give to other elderly people who are not able to cover themselves with private insurance.
I believe that the only criticism which could be made of this clause and which in certain circumstances could be justified is that £40 million will be taken away from the NHS and be used to subsidise the tax relief which this clause would create. The sum of £40 million is very small in terms of the total NHS budget. I do not believe that it is measurable in the amounts which the Government are increasingly giving to the NHS. The Government are increasing the sums given to the NHS by very large amounts. Indeed, there is every evidence to show that this £40 million is in addition to Health Service resources rather than a substitution or a change in the resources from one point in health care to another.
I therefore welcome the very beneficial effects which I believe this clause will have. It will be a major help to certain sectors of the elderly population. It will have a very limited detrimental effect on the overall tax position, which I believe is well justified by the major benefits to the health care of the elderly and of the country generally.

Dr. Moonie: I listened with great attention and interest to the speeches of the hon. Members for Stamford and Spalding (Mr. Davies) and for Fulham (Mr. Carrington) but had some difficulty in getting the gist of what they were trying to say. I can only conclude that we have here as accomplished a pair of bankers as we have ever had in the House. My granny, Mr. Hogg, as you will well appreciate, being from a similar part of the world, used to have a pair of wally dugs on her mantelpiece. I have heard more sense talked by the dugs than I have heard from that pair this afternoon.
The Chief Secretary, in reply to a remark by me from a sendentary position on the subject of the dock labour scheme, was somewhat dismissive of the analogy which I raised. I put it to the Committee, however, that it is appropriate because, while he was engaged in telling us with hand on heart that his party had no intention whatsoever of extending this tax relief, I attempted to draw his attention to the fact that two weeks before the Dock Work Bill, abolition of, was introduced, his hon. Friends were similarly standing with hand on heart saying that they had no intention of bringing that in either. I merely use that to show just how much faith we can put in the Minister's word on this occasion.
I hope this evening to show that this proposal is utterly irrelevant to the health needs of the British people. The National Association of Health Authorities yesterday identified a cumulative underfunding of the NHS totalling £3 billion. We should remember that that association is not exactly stuffed with socialists, if the representatives that I have met are anything to go by. So, at a time when the Health Service is underfunded by £3 billion—and this is said by the Government's friends, not its enemies—the Government have shown us where their real priorities lie by promoting private medicine, not to supplement the NHS—I will come to some detailed arguments on that in a moment—not to ease its burden, but to begin a dubious crusade to change its nature and force more and more people to go to the private sector for a larger percentage of their health care and to leave the NHS to function, as they would like it to, as a safety net for those who cannot afford the insurance premiums for private care, those who in the main are old. I can assure hon. Members that there will not

be too many pensioners in my constituency rushing to take advantage of the tax relief on health insurance premiums after this scheme is brought in, assuming, of course, that I fail to persuade enough hon. Gentlemen to change their minds on the matter.
Those who are old, those who suffer from chronic illness and those who are locked in poverty are the ones who will be left, under the Government's ultimate ideas, to be dealt with by the NHS. There will be those with mental illness or mental handicap—groups which are not covered by private medical insurance, those who have been so shabbily treated over the past 10 years and, I accept, before that—those for whom our Health Service remains a national scandal and an international disgrace.
On the surface, as the Minister said, this is a small fiscal measure, costing, by the Government's admittedly curious accounting system, a mere £40 million in its first full year. It is a modest measure, we are asked to believe by the Chief Secretary to the Treasury, aimed at answering the pitiful cries for assistance that have come to his ears from those who have had their cover paid for them by their employers over the past few years and 'who will lose it when they become pensioners.
On the contrary, this is not a minor change: it is a significant precedent that is being set by the Treasury, which has been forced into an ideological dilemma by the Prime Minister, who has decided for her own reasons to listen to the voice of self-interest, of special pleading, rather than that of reason. This, make no mistake, is merely the first step in the process. It will not be long before we are told that it is essential to extend it to other age groups and then to other areas of the economy, as the hon. Member for Beaconsfield (Mr. Smith) has mentioned in the past; to the area, possibly, of education. Before long, by the same logic, they may find the company car just as essential to an elderly person. Mobility is a tremendous component of health, as anybody involved in preventive medicine must know. It is just as logical to extend tax relief to the company car for the person who leaves employment as to extend it to medical care.

Ms. Abbott: On a point of order, Mr. Chairman. I understand that there has just been a High Court ruling that the Government's leaflet on the poll tax is illegal. Would that be of relevance to this debate?

The Temporary Chairman: I doubt whether the hon. Lady could find a way of bringing that in order, although as this afternoon has progressed it seems to me that many things have been in order that might otherwise have been out of order.

Mr. George Howarth: Further to that point of order, Mr. Hogg. Would it be inappropriate at this point to suggest that perhaps the Minister responsible should come to the House and make a statement, because clearly it is a matter of great national importance and the world outside will be very keen to hear how the Government will explain this to the country?

The Temporary Chairman: Whether or not the Minister comes to the Dispatch Box to make a statement is not a matter for me or for the Committee.

Dr. Moonie: I am sure you will agree, Mr. Hogg, that that intervention was most interesting, and I see great consternation on the faces of Conservative Members.
Philosophically, I am implacably opposed to private medical care, but I would not deny another person's right to make his own decision as to whether it is right or wrong.
I oppose the scheme on sound economic grounds as well. Public health care cannot be matched in the private sector at the same price. It is an asset that is the envy of every other civilised nation. It is effective and economical, and is equitable in its treatment of people. It requires only an adequate level of resources, but that has been repeatedly denied to it by the Government, despite the Government's protestations and cook-book figures. Those resources have been denied at a time when the Treasury's coffers are bursting with money that could be spent to alleviate some of the country's relatively minor problems.
There are many good reasons why right hon. and hon. Members in all parts of the Committee should oppose the scheme. I disagree strongly with tax allowances or perks. I believe that the tax system should be essentially neutral, and Treasury Ministers probably do as well. However, in the case of mortgage tax relief, right hon. and hon. Members in all parts of the Committee acknowledge that it involves a degree of political expediency as well as moral rectitude in ensuring that people are treated equitably. It is perhaps not as easy to do away with some longstanding privileges as it is with others. In the past, the Chancellor of the Excheque has made statements broadly supporting the view that the tax system should be neutral, and they had my support. In any event, I see no reason for introducing a new form of tax saving that will be paid for out of the public purse.
The new scheme must be regarded as a retrograde step. If the Chancellor stays in his job long enough, he too will come to regret it. The deadweight cost alone will be far higher than the Treasury's forecast. Money paid by other people into the Consolidated Fund will be used directly to subsidise the cost of providing a minority with private medical insurance. That subsidy will benefit people who cannot, by any stretch of the imagination, be deemed to be in need of such care.
The scheme is also inequitable. It benefits a minority—not just pensioners, but whoever pays the premium. That can be any relative or friend who can prove that they have stumped up the money. That is unfair in the extreme. The vast majority of pensioners cannot afford private health care, though many of them pay taxes and will be subsidising those who will be enjoying the scheme's benefits. Very few pensioners in my own constituency are likely to enjoy any benefit.
One point that has escaped the attention of most people who, unlike myself, do not have the good fortune to work in health care is that the subsidy will be paid to people who are healthy. Private medical insurance by definition—particularly in respect of the elderly—is not held by those who are sick. If one is sick, one is excluded from joining such schemes. As one of the benefits of private health care is that there is no waiting time, one can assume that the deadweight cost will be borne entirely by people who are either healthy or whose past ailments have already been treated, with very few exceptions. I do not see why a health care benefit should be paid to people who are healthy. Money should on the contrary be spent on those requiring health services and whose medical needs have already been identified.
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I do not believe either that the scheme makes good business sense. The subsidy will go straight into the companies' profits. As was said by my hon. Friend the Member for Dunfermline, East (Mr. Brown), the money will not be passed on for health care. More importantly, private sector costs are rapidly escalating as the companies involved attempt to maintain their margins. Such schemes are largely concentrated in London and the south-east, so it is hardly surprising that their costs are rising at the rate that they are. The subsidy will serve to distort the health care market and accelerate the rising premium levels—in much the same way that mortgage tax relief helped to increase house prices over the past decade.
I also oppose the measure on the ground of efficiency. It is targeted at the healthy and at the better off, and is generally wasteful. The same amount of money spent within the National Health Service would bring three times as much benefit. That has been clearly shown in my own constituency. Under a Government's initiative, money was allocated to reduce waiting lists. The health board, quite rightly, tested the market and investigated what the private sector could offer, but it discovered that by rearranging its own wards and theatres three times as many operations could be undertaken there than in a comparable private hospital. That analogy holds good in any other part of the country.
The proposal is senseless. I do not know whether it was dreamt up by the Prime Minister or by some idiot savant in one of her so-called think tanks. Like the rest of the Government's health care proposals, the scheme is born out of expediency and self-interest, and it is not based on any proper analysis of health needs. Therefore, I hope that right hon. and hon. Members in all parts of the Committee will reject it when the Opposition amendment is voted on later tonight.

Mr. Tim Smith: Although I disagree with much of what has been said from the Opposition Benches this afternoon, I must tell my right hon. Friend the Financial Secretary to the Treasury that I have reservations about the scheme, but largely for tax reasons. Before explaining them, I shall touch on one or two details of the proposed relief. I refer first to a sentence in an Inland Revenue press release stating:
Contracts paying a de minimis, sum of up to £5 a night for small out-of-pocket expenses—for example to cover newspapers and flowers—will, however, qualify.
A cash payment of £35 per week cannot in my view be justified. I know that it is de minimis, but when people enter either a National Health Service or private hospital they make savings in their outgoings. To allow them £5 cash per night out of their policy is wrong.
My second point has been touched on by one or two other hon. Members—that there is no cap on the relief. The table of costs of direct tax allowances and reliefs in the public expenditure White Paper reveals the £30,000 limit on mortgage tax relief, which we all know about, as well as the £4,800 limit on personal equity plans. There is also a £40,000 limit on the business expansion scheme. However, the private medical care scheme imposes no upper limit on the amount of premium qualifying for relief. Although the contract must fulfil certain conditions, there is no upper limit to the premium it involves, and perhaps there ought to be.
I am concerned also about the deadweight cost. The Red Book states that the cost for 1990–91 of £40 million


assumes an increase in take-up as a result of the new relief of 10 per cent. That means, of course, that 90 per cent. of the new relief will go to people already paying these premiums, and the whole of that cost, I am sure my hon. Friend will accept, is a deadweight cost. That is a worrying factor because it means that the number of people it is estimated will be able to benefit from the relief is 5 per cent. of the 12 million pensioners in this country, which is 600,000 people. Of those 600,000 people, just 10 per cent., or 60,000, will be taking up this benefit because of the tax relief available. That is exactly half a per cent. of all pensioners.

Mr. Max Madden: The hon. Gentleman is making a series of very important points and he has indicated the people who may well benefit from this medical tax relief. Am I right in suspecting that the Prime Minister could be one of those people?

Mr. Smith: The Prime Minister has been mentioned in the course of this debate, but I am not in a position to comment on that.
The next thing I am concerned about is the fact that the Treasury has decided that it is appropriate to give the tax relief not just at the standard rate but at the higher rate. There was misunderstanding earlier between my right hon. Friend the Chief Secretary and the hon. Member for Dunfermline, East (Mr. Brown) because two separate pieces of information were given which did not appear to be capable of reconciliation. I think they are. The first is that half of the £40 million will go to higher rate taxpayers. That is a matter of concern because it means that £20 million will go to higher rate taxpayers, so by definition £7·5 million will simply be relief at the higher rate, which is a disproportionately large amount. My right hon. Friend also said that 80 per cent. of the beneficiaries will be standard rate taxpayers. The reason for the apparent discrepancy between those two facts must be that a lot of the people who will pay the premiums are not retired people at all but the children of retired people, many of whom will be higher rate taxpayers.
When it comes to whether this relief is justified in terms of taxation policy, we have to look at what is right in principle and I think we should start with the general proposition that we should have, as far as possible, a tax-neutral system and as few tax reliefs as possible. Of course, my right hon. Friend the Chancellor of the Exchequer has done away with quite a few, for example, life assurance premium relief and minor personal reliefs, but we still have quite a large number of tax reliefs, which are listed in the public expenditure White Paper, and they can be justified on two grounds: first of all, on the grounds of encouraging savings and home ownership, and secondly, on the grounds of encouraging enterprise and trying to make the economy more efficient, for example, profit-related pay and the business expansion scheme.
However, this proposed relief does not fit into either of those categories and is difficult to justify in terms of the existing arrangements. The record of the Treasury has not been just to do away with some reliefs, but to cap some others. The £30,000 limit on mortgage interest relief has been with us for some time, so that the real value of it has fallen substantially in recent years, and in this Budget we have seen for the first time a cap on occupational pensions,

such as the new qualifying limit for salaries, which will be £60,000. If one chooses to have a pension based on a higher salary than that, one will not get any tax relief.
I support that. It is right that there should be a cap on these tax reliefs, because they are all in effect public expenditure and have to be paid for by other taxpayers. That is why they are listed in a table in the public expenditure White Paper, which I have already referred to. However, this relief, like the mortgage interest relief at source relief, is public expenditure in another way in that it also goes to non-taxpayers. It is more than just a tax relief because it cannot be described in that way for non-taxpayers, who have no tax liability. It is a straight subsidy to them, and we should be clear that that is what it is.
Looking at the other arguments used to support this, my right hon. Friend argued that it is a difficult time for people when they retire, because, when in employment, the employer provides this benefit for them. They do not pay for it themselves; it is a benefit in kind, part of their remuneration package, and the company gets tax relief against corporation tax. On the other hand, of course, they get taxed on it themselves; they have to pay income tax on the benefit in kind if they are paid more than £8,500 a year, which of course a majority are. The argument goes on that when they retire they are suddenly faced with paying the premium themselves, when they have a lower income because they have gone to their retirement pension.
That rather misses the point of why we allow this as a tax deductible cost for employers in the first place. Why do employers pay these premiums? They do it for their own self-interest so that if a member of the work force becomes ill they want to minimise the time he is away from work, and one way of doing that is to pay private health premiums to ensure treatment is received as quickly as possible so that the employee can return to work. That is perfectly reasonable, but we should not kid ourselves about why they do it. Different considerations apply when someone retires, and it is very difficult to justify providing this relief, for the reasons I have already mentioned.
I am sorry to disagree with my right hon. Friend, who said at the end of his speech that it would provide old people with peace of mind. It will never do that because it cannot be comprehensive. It is impossible to insure against every possible contingency and liability which arise in old age. In particular, of course, a lot of old people need long-term care, which is where the high costs arise to the Health Service, and there is no way one can insure against the costs of long-term care. One can insure against short-term illness, which is fine as far as it goes, because it will relieve the Health Service. There is no doubt about that. I am very much in favour of encouraging people as far as possible to use private health care. In the Second Reading debate I said that I have never understood why the Opposition complain that the Prime Minister does not use the NHS, because everybody who does not use it relieves it and there are more resources available for others. I have no difficulty about that. The same is true of the education service.
What we are debating this evening is whether it is right to give those people who make that choice tax relief. I am in favour of freedom of choice, but should we give tax relief to encourage people to make this decision? On the basis of what I have heard, I do not think that the case has been proved.

Mr. Charles Kennedy: I very much agree with the concluding sentiments of the hon. Member for Beaconsfield (Mr. Smith). Clearly the hon. Member for Hackney, North and Stoke Newington (Ms. Abbott) was not listening to him, because many of her colleagues concurred with him as well. We are not against choice in society; even the policy reviews of today are not against choice in society. We are against choice for the more privileged being tax-funded at the direct expense of the poorer in society. That is the nub of the offensiveness of these proposals, and the subsidy that the Government are giving. My hon. Friend the Member for Berwick-upon-Tweed (Mr. Beith) was quite correct in what he said when he moved an earlier amendment. In his opening speech, the Chief Secretary seemed to express surprise at the depth of feeling this subject aroused, and he said that he could not understand why there was so much concern and controversy, because, after all, it affected only "a limited number of elderly people", so it should be particularly contentious.
We have heard that there is £40 million at stake—a significant sum of money. I do not agree with the hon. Member for Fulham (Mr. Carrington), who seemed to feel that, because it was a minuscule part of the total NHS budget, we should become particularly exercised over it. There is a significant amount of money at stake, but there is also a principle at stake. That principle—this follows directly from what was said by the hon. Member for Beaconsfield—is that the tax system should not be used, wherever possible, to subsidise or enhance choice for the minority at the expense of the majority.
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The Secretary of State for Health and Social Security, as he was at the time, said in a BBC television interview for the programme "On the Record" that he was not considering such tax subsidies, because that was what the NHS was there for. Since the splitting of his Department into the Department of Health and the Department of Social Security, that Secretary of State has been confined largely to social security issues, while the new Secretary of State for Health has introduced a White Paper. I do not think that the proposal in the Budget can now be seen in isolation from other proposals in that White Paper.
While the Budget is willing to fly in the face of the Chancellor's previous statements and his track record on tax reform and tax balance, the White Paper is silent on the subject of resources. There is a striking contrast between the two Departments. One is bringing forward major structural proposals for National Health Service reform, yet has nothing to say about the resources needed to improve the quality of health care. The other—the Treasury—has produced a proposal that, by its own admission, will not put a penny into the National Health Service directly, but will merely provide a subsidy for those who wish to opt for treatment outside the National Health Service. That seems a most curious, convoluted and contradictory set of proposals. Choice is all very well, but that kind of subsidised choice strikes me as offensive when the National Health Service is not receiving the funding that it deserves.
It is pretty clear from the White Paper where the Government are going. They are making no secret of it: the Prime Minister has said many times in the past that she is in favour of a more American-style "go-getting" society. She does not appear to give even a passing thought to

those who may have nowhere to go and nothing to get, and that is never more obvious than in health care policy. As a Labour Member has already pointed out, many patients are languishing on waiting lists for referrals to consultants. The proper standard of service is not being delivered. One hopes that adequate health care would be the priority of any Government, whatever their political complexion; sadly, it is not the priority of this Government.
It is clear that this type of subsidy will lead us further down the road to private health care. If people are fortunate enough to have a disposable income that allows them sufficient consumer choice to pay the insurance premiums for private health care if they so wish, good luck to them; I am not making an egalitarian point. How they spend their money is up to them. They should not, however, be able to indulge that choice, created by their security and affluence, at the direct expense of others who enjoy no such benefits and have not the opportunity to go one better at the taxpayers' expense. Sad to say, that fundamental principle is now lost on the Government.
Several points have been made about administration. I note that amendment No. 21 endeavours to limit relief to the basic level of income tax. Let me make it clear that I do not believe that such a concession should be introduced in the first place, but if we are to believe reports, the Treasury was never in favour of the subsidy and it appeared in the Budget only as a result of insistence from No. 10 Downing street. If it is to retain any self-respect, the Treasury should go for the option in the amendment rather than for the entirely offensive option of allowing relief at the higher rate of 40 per cent. Limiting it to the basic rate would by no means ameliorate the difficulty that the Government are creating but it would at least save the additional financial and administrative machinery that would be required to collect the top-rate contributions.
It seems bizarre, indeed perverse, that—judging by the figures that have been given in earlier speeches—undue additional resources will have to be devoted within the Treasury or Inland Revenue to top-rate taxpayers who are already receiving an enhancement to the buying power of their income that is well in excess of anything that they deserve. If the Government are so interested in prudence, efficiency and the correct use of public money and Civil Service time, I would expect them to find some attractions in amendment No. 21.
The Chief Secretary was at pains to stress the help that the measure would provide for the elderly, and how much it would assist social policy. That view does not seem to be shared by Age Concern or the Royal College of Nursing, both of which have extensive and professional experience. The RCN points to the glaring inequality of the Government's social policy:
Put simply, clauses 51–54 of the Finance Bill fail the test as a social policy, just as they are fatally flawed as a fiscal policy.
That, surely, must be the epitaph on the tombstone of this part of the Bill, and the Treasury, the Government and indeed the Conservative party should be ashamed of it.

Mr. Tony Worthington: In preparation for this debate I have been reflecting on the way in which society has treated two people in their mid-seventies.
On Friday I was visited in my surgery by a man whom I guessed to be about that age. He complained that he had been to a doctor and had been diagnosed as having psoriasis, an unpleasant complaint. He had been


prescribed an ointment, which was gradually dealing with the psoriasis but was destroying his clothing: his underclothes and other clothes were marked in a way that made them unfit to wear. He asked what could be done. Could he obtain cash with which to replace the clothing that had been spoilt by the medical treatment that he had received?
I thought about it and said, "I cannot think of anything because under the Department of Social Security changes last year special payments have been withdrawn. You might get a loan from the social fund but probably you would not, because you are poor and it would be impossible for you to pay it back." The man needed probably £50 to £100 for basic requirements.
I contrast him with another person in his mid-70s, say, a Mr. Denis Thatcher. According to BUPA, the cost of comprehensive cover for a married couple, where the older of the couple is over 70, would be cut from £1,102 to £661. I assume that Mr. Denis Thatcher pays tax at the rate of 40p in the £. That may be a foolish assumption, because there are enough concessions nowadays for a skilled operator like Mr. Thatcher to make sure that he pays only at the 25 per cent. level. At the 40 per cent. level, that would he a direct gift—

Mr. Couchman: On a point of order, Sir Anthony. Is it in order for the hon. Gentleman to make disparaging comments about someone who has no possibility of answering the comments? I think that it is a most disgraceful slander.

The Temporary Chairman (Sir Anthony Meyer): It is a point for debate; it is not out of order.

Mr. Worthington: I would be delighted to give Mr. Thatcher the opportunity to reply and to debate the issue with me. It is a fair point to make that the Government are offering a choice about how to spend money. If someone in the position of Mr. Thatcher were to take out a BUPA comprehensive scheme, he would get a direct gift of £440.
It is a question of priorities. Have the Government got the priorities right? Will the people who will receive the gifts from the taxation system merit those gifts? Should they have priority? There has been reference in the debate to the fact that the Chancellor unfortunately has turned away from his attempt when he became Chancellor to turn taxation and the receipt of income into a level playing field, so that all kinds of income were treated fairly and equally. I would have supported him in that attempt, but that is not what we are getting now.
The proposal will lead to a direct gift from the rest of us to a group of people to enable them to take out private medical insurance after the age of 60. As has been said many times, there is an element of dishonesty about costing it at £40 million. That might be the cost in the first year, but it would be more honest to say that the total cost will be much greater. Many hon. Members have pointed out the sheer unfairness of the proposal. Someone on a higher rate of taxation could get the higher rate of tax relief on his income because he supported the health insurance of a relative or someone who was not even a relative—

Mr. Jeremy Hanley: Is the hon. Gentleman trying to say that those who choose to take out health insurance are by definition rich and those who choose to use the National Health Service exclusively, without taking out health insurance, are by definition

poor? Surely some very wealthy people choose not to take out health insurance, thus taking pressure off the Health Service, and some people with very little money choose to use their money for things such as private education or private health care because they believe that that is best for them and their family. I hope that the hon. Gentleman is not making the mistake of assuming that all people in that category are rich.

Mr. Worthington: That was a strange intervention, which would have been better made in a speech by the hon. Gentleman. There seems to be a shortage of speakers on the Government side. His intervention was not related to anything that I was saying. I invite the hon. Gentleman to make his own speech in his own time.
What is inadequate and wrong about the proposal is that we are subsidising through taxation the private health sector. We are subsidising a relatively inefficient system compared with the National Health Service. It does not matter which yardstick one takes when considering health care in this country or in the rest of the world; it costs more to provide services through the private sector than through the National Health Service.
Under the private system, human health care is moved into the world of garage and motor mechanics. What I mean by that is that if one is unfortunate enough to have an accident with the car, the immortal words spoken by the mechanic are, "Is it an insurance job?" If it is, that means that it will be bonanza day for the owner because of the treatment that his car will receive, and it will be bonanza day for the garage because of what it can charge. That is the experience with private health insurance as well. Wherever private health insurance has been introduced, up go the costs. One gets unnecessary medicine, which is administratively very expensive. That is what we are being asked to subsidise through the Government's proposal.
Going back to the idea of a level playing field, when rates of income tax were heavily progressive—I would argue, probably against my party, that they were too severely progressive and that it was counter-productive—there was a case for people seeking to receve part of their income in perks. It might be argued that, in the past, the British entrepreneur or executive was underpaid compared with his European equivalent. He may have been underpaid, but he was certainly over-perked. It is difficult to find any other European country where there are so many ways in which people can receive tax relief with the agreement of the Government.
I thought that the Government had recognised that tax perks were counter-productive and that all income should be treated equally. I was applauding the fact that the MIRAS scheme was being limited to £30,000 and was being phased out, although that was unspoken. One welcomes that and the fact that the tax perk of the company car is being made less valuable.
A great many other perks remain. I am grateful to the Monks Partnership Ltd. for its work on board and senior management remuneration which pointed out that, among senior managers, 84 per cent. get free medical insurance, virtually all are given life assurance policies, 53 per cent. have their home telephone costs fully or partly met by their companies and 54 per cent. receive free newspapers—that is the level it gets down to. According to The Economist, 30


per cent. have their golf club fees paid. We should be getting away from that style of paying people. We should have fairness for everyone.
The extension of a tax break on health insurance premiums for people over 60 is a step in the wrong direction. However one looks at it, it is a non-selective benefit. The poll tax is a rigorous means test; housing benefit is a rigorous means test; but tax relief on private health insurance involves no means test whatsoever. It is simply an attempt by the Government to make private health insurance and private medicine certain to succeed, even if people do not want it, because the conditions under which it operates are equivalent to living in a tax haven.
We should resist that. It has been said many times during the debate, and it should be challenged, that it is indisputably true that, if someone uses the private health system, they are taking a burden off the National Health Service. I challenge that. I ask Conservative Members to produce the research that shows that the impact of private health care in Britain is taking a burden off the National Health Service.
If I am sitting in front of a consultant, and he says, "I can operate on you next week in the private sector, but I can only operate on you in six months' or nine months' time in the National Health Service," I want to know how that is relieving the National Health Service. I want to know how that doctor can efficiently keep his private health list down so that he can operate next week without shunting someone down his National Health Service list. How does he achieve that? How does he move someone up his private medical list without moving someone else down his National Health Service list? I want to know how that can be achieved, given that there are a finite number of doctors and consultants. What is the consequence of such a doctor giving priority to his private list? It is frequently alleged that the work is then done by the senior registrars or junior doctors in that specialty.

Mr. Couchman: From my experience as a former chairman of a health authority, perhaps the hon. Gentleman would like to know that many consultants are not contracted to perform full time for the National Health Service. Many of them work for the National Health Service for seven elevenths, eight elevenths or nine elevenths of a week. The rest of the time is their own to operate within the private sector. If someone has a hip operation in the private sector, where would he have that operation if he were not able to take advantage of the private sector? The work would be thrown straight back on to the National Health Service. I accept that he might be way down the list and that he has paid for the privilege of going up the list. That may be ideologically unhappy for Opposition Members, but ultimately every operation performed in the private sector means one operation fewer to be provided in a National Health Service hospital.

Mr. Worthington: There are 168 hours in a week, and that number cannot be increased. A doctor can operate for a limited number of hours. The more that that doctor operates in the private sector, the fewer operations he can perform in the National Health Service.
We have a great deal more to do. Unsupported assertions are being made by hon. Members on both sides of the House. Opposition Members have asserted that the

private health service is parasitical on the National Health Service, while Conservative Members have made unsupported assertions such as the one we have just heard. The necessary research has not been done to bear out my belief that when we support the private health system through such legislation as we are discussing today we further damage the National Health Service because no one will pay or should pay for that which is not worth paying for. People pay for the private health system because they get treated more quickly and are dealt with more rapidly.

Ms. Abbott: I have never had the pleasure or the privilege of chairing a health authority, but I am the daughter of a nurse. It is all very well for Conservative Members to talk about consultants, but it takes more than consultants to provide treatment for a patient. Private health care leeches off the work of nurses and ancillary workers.

Mr. Hanley: We have provided 60,000 more in the National Health Service.

Ms. Abbott: Perhaps the hon. Gentleman should stand up and intervene. It takes more than consultants to provide treatment. It is the opinion of ordinary Health Service workers—not the chairs of health authorities, but nurses, ancillary workers, cleaners and other staff—that private health care does not provide choice but is a drain on the National Health Service resources, as the private sector trains no one.

Mr. Worthington: It is unfortunate that hon. Members on both sides of the House have tended to concentrate on those at the top of the system without taking into account the contributions that are made lower down.
In conclusion, I emphasise, that private health care flourishes in Britain because it is treated as a lame-duck industry that needs Government assistance in order to thrive. Inevitably it will thrive because it will be in the interest of the Government to create a two-tier system in which people are constantly forced to decide whether the National Health Service is providing an adequate service. If they decide it is not, they will invest in private medicine. I believe that, through provisions such as clause 51, the Government are driving more and more people to choose private medicine by accentuating the differences between private health care and the National Health Service.

Mr. Ian Gow: Before I come to the main topic of the debate, I should like to ask my right hon. Friend the Financial Secretary two questions. I had not realised until the debate began that those who are not liable to income tax could claim tax relief. But if I understand clause 51 aright, even those who are not subject to income tax may deduct from their contribution to BUPA or PPP an amount equivalent to 25 per cent. of the premium. Clause 51(6)(b) states that the recipient of that contribution to a private scheme may
recover from the Board an amount equal to the amount deducted.
Supposing that an elderly person, who is not liable for tax, who makes a contribution to a private insurance scheme, deducts 25 per cent. of the premium and the company to which that premium is paid is obliged to regard it as if the premium had been paid in full, can that private company recover from the Inland Revenue the amount of tax, even though no tax is payable by the contributor?
My second point is this. If I understood my right hon. Friend the Chief Secretary correctly, he said, when responding to an earlier observation, that clauses 51 to 54 had been the subject of discussion with the European Commission. That came as a great surprise to me. When my right hon. Friend the Financial Secretary replies to the debate, will he tell us in what circumstances we had to obtain clearance from Brussels for clauses 51 to 54? I am pleased that my hon. Friend the Member for Wells (Mr. Heathcoat-Amory) is in his place on the Treasury Bench. He and I have a common view about the legitimacy of interventions from Brussels in affairs that we believe should be the responsibility of this Committee and this House. It would be of considerable concern to me if we had to obtain the sanction of either the bureaucrats or the Commission in Brussels for the proposals.
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My right hon. Friend the Chancellor, in his six years in office, has often proclaimed that part of his purpose is to move towards fiscal neutrality and he has already taken several steps in that direction, which I applaud. He has sought, for example, to diminish the perk of the company car, to which the hon. Member for Clydebank and Milngavie (Mr. Worthington) referred. My right hon. Friend has removed tax relief on new life insurance premiums. Clause 51 is not consistent with his previously declared policy. As someone who approves of fiscal neutrality and who believes that it should be up to the individual to decide how to use her or his money, without pressure from the Government or taxation privileges, I am somewhat anxious that we seem to be going in a direction opposite to that in previous Budgets.
Even my right hon. Friend the Chancellor has not said that he wants to achieve perfect fiscal neutrality. He has persevered with tax relief on mortgage interest and with a tax arrangement that allows people to make contributions to retirement pensions and to deduct those contributions when calculating taxable income. Even my right hon. Friend has not said that complete fiscal neutrality is his goal, so the Committee must examine the extent to which the conferring of an additional element of discrimination in favour of particular taxpayers is justified. Clearly, my right hon. Friend the Chancellor and my right hon. Friend the Financial Secretary believe that there are exceptional circumstances, as they believe there are in the cases of providing pensions and purchasing a house.
I want to devote the rest of my speech to the legitimacy of the claim about exceptional factors. This afternoon we are giving legislative effect to the announcement made in "Working for Patients". We have known about it since January, when the White Paper was presented to Parliament. The White Paper, which we are to debate on Thursday, is clear about the proposal. It says:
There is already a growing partnership between the NHS and the independent health sector.
I pause just to add that I welcome that growing partnership warmly and to note that even the Labour party, and even the late Aneurin Bevan, when he set up the Health Service, did not seek to eliminate the private sector of medicine. Even those who sit on the Opposition Front Bench do not suggest that the remodelled Labour party is about to submit to the British people a policy for the abolition of private medicine. I am sure that I carry

Opposition Members with me when I speak in praise of the independent sector of medicine and say that I welcome the growing partnership.
Page 68 of the White Paper says:
In 1986, contractual arrangements between the NHS and the independent sector led to over 26,000 in-patient treatments".
Again, we are talking about lightening the burden on the Health Service and that is a particular example. That point was also made by my hon. Friend the Member for Gillingham (Mr. Couchman), who said that without doubt the existence of independent hospitals lightened the burden on the National Health Service.
I do not doubt that independent hospitals lighten the burden, so I can understand why my right hon. Friend the Financial Secretary said on Second Reading of the Finance Bill:
If we can generate just a little additional demand for health insurance, that will relieve pressure on the National Health Service".—[Official Report, 25 April 1989; Vol. 151, c. 893.]
I agree with my right hon. Friend. We need to take such steps as we can to diminish the pressure on the National Health Service.
I want to read one final quotation. In our White Paper in January, we said that the purpose of what is now clause 51—which was then only a glint in my right hon. Friend's eye—was to
encourage both the provision of medical insurance for older people and its take-up".
That purpose is laudable. When clause 51 comes into operation on April 1 1990, there will be an increase in the take-up of private medical insurance. A consequence of that will be to diminish the pressures on the National Health Service and there is not a single member of the Committee who would not agree that there are severe pressures on the service.
Despite my serious reservation about the departure from fiscal neutrality—a laudable goal that I share with my right hon. Friend the Chancellor—the proposal is justified in the exceptional circumstances in which we find ourselves and I shall support it in the Lobby tonight.

Mr. Thomas Graham: The clause is an act of political bribery. The Government are trying to gain a few extra votes at the expense of all those who are queueing up for operations. I find it incredible that they should have to play this game and introduce a scheme that will allow the rich—and perhaps those who are not so rich—between £40 million and £100 million more in tax concessions. That £100 million will end up in the coffers of the Government's friends in the private medical world—folk who will probably spend it on champagne when it could have been spent on medicine if it had gone to the National Health Service. The proposal is obscene, coming as it does after a massive lobby by people all over the country in defence of the National Health Service. It is incredible that we should be talking about a £40 million subsidy to people who do not need it and who can already choose private health insurance, when many people rely entirely on the National Health Service.
I recently met representatives of the Inverclyde Crossroads care attendants scheme. It would break hon. Members' hearts to meet the carers whom I met, who know that that scheme is to come to an end. The £40 million that the present measure will cost could have been used to save the country hundreds of millions of pounds.


Throughout Scotland care attendant schemes are having to come to an end because of lack of money. I know one old woman of 64 who is looking after her mother of 84. It broke my heart to see that woman cry. She knows that the care attendant scheme is to end in September because of insufficient funds. At the moment, carers come in two or three days a week to give that woman respite and allow her to take some time out from constantly looking after her mum. She does not want her mother to be in hospital or away from her; she wants to look after her until the day she dies.
The £40 million that the clause will cost could have spared that woman the trauma that she faces when the scheme ends in September. She does not know whether she will have to put her mother into care—which, after all, will cost the Government a vast sum. We are not talking about chickenfeed. If the scheme comes to an end, it will cost the Government about £3 million a year. What does it cost to run the scheme? It costs £1,000 a week—a miserable sum. For the sake of that sum, the Government are condemning nearly 60 families to a thoroughly troublesome time. They do not know where to turn now that the Government have turned their backs on them. The Government have not turned their backs on the rich—on those who can afford private schemes. The people whom I met cannot afford private schemes. They need the Government's help.
The Government have a golden opportunity. They can stop this madness. They can reduce the waiting lists. They can ensure that the Inverclyde Crossroads care scheme can continue by releasing money to it and to similar schemes that benefit the country and its elderly people.
I recently met carers in Linwood—another working class town where not many people can afford to belong to BUPA schemes. These folk rely on the National Health Service. Hundreds of people in that community are waiting for all kinds of operations—operations that cost much less in the National Health Service than they would in the private sector. A hip replacement operation costs £2,390 in the National Health Service, whereas in the private sector it can cost anything between £2,900 and £6,000. The Government are always talking about the free market and saying, "If it is cheaper, we must go for it." I do not know, for the life of me, why the Government should want to continue to subsidise private medicine and private health insurance when the National Health Service can do the operations more cheaply. It would be far better if the Government put the £100 million—perhaps £200 million—that the clause will cost into the National Health Service, where it would be much more productive. The Health Service could then conduct the operations which no private hospital can perform more cheaply.
This week I shall be meeting doctors in my constituency who are horrified about the Government's proposals. They are horrified that such measures can be introduced when they have been denuded of funds and when they despair of seeing their patients get proper medical treatment. Those operations are not operations that can be performed in months and years ahead; the patients desperately need them now.
I recently met a woman who is in absolute agony with her arthritis. She is waiting for a hip replacement, and she told me that she is walking in her dreams. She cannot relax or rest. The Government know that there are many men

and women lying ill whose illnesses could be cured were it not for lack of money. The Government boast that they are putting money into the Health Service, yet they are squandering £40 million to £200 million in the clause. They can do something about the problem. They can ensure that we get the additional money that we need so desperately in areas such as mine by stopping this nonsense.
Schemes like the Crossroads schemes are worth their weight in gold. They give relief to families and job satisfaction to the paid carers who work in them. They give voluntary organisations a commitment to provide a service that they know is needed. The satisfaction that carers enjoy when they are granted respite has to be seen to be believed. I sincerely hope that the Government will listen to the cry for help for the Crossroads schemes in Scotland. I plead with them to listen to the cries of those who organise those schemes, which save the country millions of pounds and cost only £1,000 a week to support.
The clause is an act of barbaric piracy at the expense of the poor and the needy. The Government are wrong and they should renounce their mad commitment to supporting private insurance. All over the country people are waiting for help from the Government. At present, they can get help only if they have a few bob and can afford to join a private insurance scheme.
The Government can no longer turn their backs. Last week, they saw the result at the Vale of Glamorgan. I assure them that from now on at every by-election the electorate will return someone who opposes the Government's policies on the National Health Service—a needless policy that will result in more suffering. Men and women rely on their elected representatives to ensure that they get a fair deal.
It is time that the Government gave a fair deal to the ordinary men and women who have no money and who rely on state benefit and support and on the fairness of politicians. It is time that they promised to deliver a fair and just system so that those people can live in peace and comfort without the ills and pains that a properly funded National Health Service can alleviate. The Minister should listen to my plea and ensure that the Ardgowan hospice and others like it are given money to care for cancer patients. He should recognise that the carers are invaluable. The Government should forget their private insurance scheme and ensure that the carers receive decent help and support so that people can remain living in the community. They do not want to die in hospital.

Miss Ann Widdecombe: There has been some discussion as to whether the private sector assists or destroys the National Health Service. Obviously, many of the assumptions about whether clause 51 is an advantage or not will depend on that basic premise. I have heard nothing from the Opposition that has convinced me that the private sector does not act materially to the assistance of the National Health Service. I do not speak, as did my hon. Friend the Member for Gillingham (Mr. Couchman), as a former chairman of a health authority, but merely as an ordinary Member of Parliament. I was grateful a year ago for the private hospital in my area, when our National Health Service hospital, through a technical and not a financial problem, had to cease certain operations for many months. However, those operations were able to be carried out in the private sector. That is the sort of healthy alternative that I believe should be on offer and for which I for one am grateful.
The hon. Member for Clydebank and Milngavie (Mr. Worthington) asserted that, if consultants split their time between the private sector and the National Health Service, that would not assist the NHS, but would simply assist queue jumping. He asserted that an increased number of people would not be treated on the National Health Service. I submit that that is based on what is the rather naive assumption that, if one did not let the consultants split their time, they would spend their 100 hours a week entirely in the National Health Service and would not rather choose to spend their time entirely in the private sector, thus denying the National Health Service much expertise.
I believe that the private sector assists the National Health Service and health provision in this country. It must be encouraged through all reasonable and equitable means. If one starts with that assumption and the assumption that alternatives to the National Health Service are an enhancing factor of the nation's health, surely it makes sense to say that a section of the population that puts an increasingly large burden on the Health Service should, especially, be assisted to choose to be treated elsewhere if they wish. I find it difficult to believe that my hon. Friend the Member for Beaconsfield (Mr. Smith) could say, on the one hand, that he thought that the private sector enhanced health provision, but, on the other, that that was no reason for encouraging a section of the population that did not use it quite extensively to take it up. That struck me as an inconsistent attitude.
We know that there is an increasing number of elderly in the population and that they are becoming an increasing proportion of the population, but it is the tax-paying public who maintain the NHS. We, therefore, have a choice. We either encourage all the elderly to use the NHS exclusively and thus bear, through the tax system, the full cost of their treatment, or we say that, if they wish to have an alternative, they should be assisted. We would then bear the tax burden only of the relief which we are offering.
I believe that there is more to it than that. There is the social position and the dignity of old-age pensioners. Last year I welcomed what I saw as a major reforming Budget in the way that it gave recognition to the social and independent position of women. This year, too, we have had a reforming Budget, which gives much greater attention to the social position of pensioners.
Much has been made by the Opposition of the fact that tax relief is being allowed under clause 51 at the higher rate as well as at the basic rate of 30 per cent. However, if younger people are buying a house and pay a higher rate of tax, they receive the higher rate tax relief. If younger people buy a private pension or an occupational pension plan and they pay the higher rate of tax, they will receive the higher tax relief. Why, therefore, have the Opposition got it in for the old folk by saying that they should not receive higher tax relief?

Mr. Beith: The amendment is in my name. The hon. Lady must surely know that in the case of mortgage interest tax relief, too, I have consistently argued that that tax relief should be limited to the basic rate.

Miss Widdecombe: Therefore, I must withdraw my statement that the hon. Member for Berwick-upon-Tweed (Mr. Beith) has it in for the old folks. He obviously has it in for everybody. I think we must just proceed to disagree on that basis.
My hon. Friend the Member for Beaconsfield said that he did not understand that peace of mind was necessarily a major consideration, because there was no way that medical insurance could be comprehensive. It would not. of course, provide the long-term care which much of the NHS provides. That obviously must be so, but we should consider the fact that the elderly are the least able to take full advantage of many NHS facilities.
The elderly are liable to suffer from long waiting lists more than anyone else, because the advances in medical science which flow from the Government's considerable investment in the NHS provide surgical and medical advantages which disproportionately benefit the elderly—for example, the new simplified cataract operation and hip replacements. It means, too, that, when those advances are made, there is immediately a concomitant rise in waiting lists. Because the elderly are those who consume those services most, they are the ones who suffer from the rise in waiting lists. Whereas, if it is a rise in waiting lists for ordinary operations, an individual can choose quite reasonably whether to wait for a long time locally or to go elsewhere in the region, or perhaps elsewhere in the country, that choice is not so readily available to the elderly, who find transport difficult, who will not have young spouses to drive them and who will be less willing to be separated from their families. They need, therefore, a much increased choice, as they are less able to exercise the choice that already exists in the NHS for the rest of us.
Why should the elderly suffer a lowering of standards on retirement? It does not matter whether they have been paying for private medical insurance through their employers and that that is a benefit to the employers as well as to them. What matters is that they have had that advantage. When they retire and become dependent on a pension and thus a reduced income, the cost of medical insurance can have a major effect on the decision as to whether to keep up subscriptions. If we want the elderly to have the same opportunities and the same freedom of choice as the rest of the population, we must make it fairly simple for them to keep the benefits which they have always enjoyed. Because clause 51 states clearly that, whenever that benefit was acquired, the tax relief will be implemented after pensionable age, that will enable a pensioner to keep up a benefit that he has always enjoyed. It is really having it in for the old folks to say that they can enjoy a benefit right up to retirement age, but after that it will be made difficult for them.
I believe that this is a social as well as a financial piece of legislation. It will enhance health care provision. It will also improve the position of pensioners and bring them into equity with younger people who already benefit from a substantial range of reliefs.

Mr. Win Griffiths: I rise in support of the amendment tabled in the name of my right hon. and learned Friend the Member for Monklands, East (Mr. Smith) that deals with the specific question of when, if ever, the scheme should be implemented. It appears that we have a fundamental and significant new tax relief that is, in fact, operating in the opposite direction to which the Government have previously indicated they intend to go. Only a minority of Conservative Members who have spoken have given their wholehearted support to tax relief on medical insurance. The hon. Members for Horsham (Sir P. Hordern), for Beaconsfield (Mr. Smith), and for Eastbourne (Mr. Gow) all expressed reservations about the scheme, although it


appears that at least one of them—the hon. Member for Eastbourne—will persuade himself to vote with the Government.
The questions that have been raised relate to the fundamental issue of whether we are taking pressure off the Health Service by extending the number of people using private medical facilities. The answer must unequivocally be no. We are talking about the amount of money that the Government are making available to support the provision of medical services in the United Kingdom and whether the Government can provide more and better medical services by spending that money in the Health Service or by spending it in the private sector. On any set of comparisons, the only conclusion that any reasonable person could reach is that it is far more cost-effective and cost-efficient for the Government to direct their resources towards the National Health Service.
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Let us look at some of the factors involved. It currently costs an average of £415 to provide hospital care for a person between the ages of 65 and 74. Under one of the medical plans—a PPP plan—the amount of relief for the taxpayer paying tax at 40 per cent. will be a subsidy of £589 from the Government. For full medical cover for a person between the ages of 70 and 74, the Government will provide a £645 subsidy. That money could be better spent providing further medical treatment for pensioners within the Health Service.
Let us compare the occupancy rate of beds in the National Health Service with that in the private sector. There is an occupancy rate in the private sector of between 35 and 50 per cent. The Nuffield hospitals have an average of 61 per cent. and are the leaders in that area. However, in the National Health Service the occupancy rate averages 81 per cent. In Wales the figure is not quite that high. In 1978 the daily occupancy rate was 78·3 per cent. and in 1988 it was 77·3 per cent. Clearly, the National Health Service provides much more treatment in its beds than the private sector.
If the Government wish to target their resources effectively and efficiently it would be far better to provide resources direct to the Health Service than to provide relief for the relatively small number of people who would take advantage of such schemes. Indeed, the Government think that that number is likely to remain relatively small.
Several examples of specific costs of different types of surgery have already been given this evening. The cost of a tonsillectomy in the Health Service is about £360; in the private sector it is anything from £600 to £1,400. Obviously, somebody is making a great deal of money out of those costings. A hysterectomy costs £1,200 in the National Health Service but between £2,000 and £3,600 in the private sector. Where is it better to have that operation carried out? The answer is clearly, in the National Health Service. That is why the Government's scheme is so objectionable. It is an inefficient use of the resources that are provided for medical care in the United Kingdom.
We must also consider who benefits and whether the scheme is likely to be extended to more and more people over the age of 60. We have heard the argument about the numbers of people who will receive standard rate relief and higher tax relief, but a far larger group of people do not pay income tax and could receive the 25 per cent. subsidy

if they paid for private health care. However, let us consider the cost of the health care that is available to them through private medical insurance. Even with the tax relief, BUPA has calculated that a couple, one of whom is over 70, who receive the standard rate of relief would still have to pay £17 per week. Can any Conservative Member imagine a pensioner couple, who are not liable for income tax but who have dangled before them the carrot of a 25 per cent. subsidy on medical insurance, being able to afford £17 per week? Of course, they could opt for the budget plan and would then have to pay only £10 per week, but that offers a much smaller range of treatment. A single person over 61 would have to pay £16 per week for the best range of treatments offered by BUPA or £10 per week if he or she opted for the lesser range of treatments.
However, we must remember that the majority of people over 60 would not be able to take advantage of any of the medical insurance schemes in any case. I am referring to people with on-going chronic illnesses. They are the people who most need attention but they would have no prospect of gaining any help from the schemes that have been forwarded by the Government in clause 51. About 60 per cent. of that group of people nationwide are adversely affected by chronic illnesses.
For people over the age of 74, the proportion rises to 69 per cent. In a country such as Wales which has a great tradition of heavy industry, those percentages are even higher. Although I do not have the precise figures to hand—I should be interested to know whether the Government have any information on this—I guess that less than one quarter of Welsh pensioners would be eligible for this misspending of our national resources.
If the Government wanted to spend that money effectively, they could tackle the ever-increasing waiting lists. We have heard protestations from Conservative Members about how, over the past year or so at least, more money has been put into the Health Service and more patients have been treated than ever before. However, the fact is that waiting lists are increasing. In Wales the out-patient waiting list has increased over the past decade by over 24,000 and the in-patient waiting list has increased by almost 300, yet more patients are being treated. We must ask ourselves why. Have the Government created such social havoc and deprivation that, despite treating more people, more people are still waiting for treatment?
I hope that this evening those Conservative Members who have expressed reservations will join us in the Lobby. The only sensible action for the, Goverment to take is to get rid of the scheme by accepting the amendment and postponing the implementation date to 1993. Then the issue of the future of the Health Service and the best way that it can be funded to provide comprehensive and effective treatment for all can well and truly be at the forefront of a general election campaign.
I do not have to remind Conservative Members that the issue of the future of the Health Service was right at the forefront of the campaign recently conducted in the Vale of Glamorgan by-election where the Government were resoundingly beaten. The big difference between the Vale of Glamorgan by-election and any other recent by-election in which the Labour party has won a victory over the Government is that that by-election result did not rely on disenchanted Conservative voters not bothering to vote.


The Labour vote increased massively because Conservative voters switched to the Labour party, such was the depth of their discontent.
Measures such as the one before us persuade voters everywhere that the Health Service is not safe in the Government's hands and that the sooner a Labour Government can take over and get rid of such proposals, the better it will be for the country at large.
I hope that a sufficient number of Conservative Members, who have already expressed reservations about the proposal, will vote with us this evening. I notice that some Members who have publicly expressed reservations are not here this evening. One such is the hon. Member for Epping Forest (Mr. Norris) who was reported in The Observer in March of this year as saying:
A lot of my colleagues are concerned about this. It sets a dangerous precedent which could take us, in easy steps, to a two-tier health service.
We also think the Government is wrong because it proposes to offer tax relief to the better off, the people who need it least.
We are talking not merely about the efficient use of resources but of using the money for those who least need the help. It would be far better if the money were used for those who really need the help. I hope that our amendment will be supported this evening.

Mr. Couchman: I had not intended to speak during this debate but I have been so incensed by some of the things said by Opposition Members that I wanted to offer a few thoughts.
I shall first refer to the interest that I declared during the Second Reading debate on the Bill. It related to a specific company that I have lately advised but is not relevant to this evening's proceedings because those treatments which might be available under the relief which the Government propose are considered in clause 53 rather than clause 51. I should also like to make it clear that I have never paid a private health insurance life premium for myself or my family. We are National Health Service patients and have always been happy with the service that we have received.
One fallacy that Opposition Members have offered us over and over again is that the relief that the Government propose, whether £40 million a year or £100 million, will not add to the total of health care resources available in this country. That is absolute nonsense. Not only is this relief more beneficial than a direct contribution of a like sum to the Health Service, but it will encourage many people who are approaching old age, who have perhaps had premiums paid through company schemes—contributory or non-contributory—to carry on using the schemes.
I have just worked out a few simple arithmetic figures in relation to the money that may be available. If £40 million is the sum of relief that is likely to be allowed in the first year, even if, as suggested, 50 per cent. of that—£20 million—goes to higher rate taxpayers, it would bring in £50 million to the health insurance schemes. A further £20 million, based on 25 per cent., would bring in £80 million, which means that £130 million would be brought in. Even allowing for the 10 per cent. that BUPA finds it necessary to charge for administration—£13 million—it would seem that £117 million would be brought into the totality of health care resources. Even if some of that is deadweight, there will still be a net benefit over and above the £40 million.
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If we look at the figures based on £100 million, they seem much more impressive. Even if 50 per cent. is paid to those who pay 40 per cent. tax, £125 million will go into health care and £200 million will be brought in on the basic rate relief, which means that more than £300 million of additional money will be brought into the total of health care resources. The deadweight in this case will be smaller because it will be taken up in the lower figure. The scheme would provide a most worthwhile contribution to resources.
The hon. Member for Clydebank and Milngavie (M r. Worthington) talked about the contributions that consultants should make to the Health Service. I pointed out during his speech that not all consultants are contracted to the Health Service for 100 per cent. of their time. Many of them work part time for the Health Service, which is lucky for the Health Service because, in many cases, these people are eminent and bring excellence to the Health Service. They could devote 100 per cent. of their time to the private sector. The fact that they do not is a gain for the Health Service.
Comments have also been made that not only consultants contribute to private sector health care, but nurses and ancillaries. However, most of those people have opted out of the Health Service and are fully employed in the private sector. They often prefer the working conditions, if not the higher wages. Some nonsense has been talked about the drain on the Health Service that would be caused by the offer of this relief. I should like the relief to be extended beyond the elderly, but I recognise that my right hon. Friend the Financial Secretary will resist any such suggestion.
Much has been said about whether waiting lists have extended under this Government. Thirty years ago there was no waiting list for a hip operation simply because no such procedure existed. Procedures that have developed during the past 30 years have benefited the quality of life of elderly patients more than that of other patients.
I welcome the clause which will allow many people, approaching or having reached retirement age, to continue to pay into private health insurance schemes and to enjoy treatment when it becomes necessary. Without any equivocation, I shall follow my right hon. Friend into the Lobby to vote for the clause.

Mr. Turner: The best contribution that we could make in this debate would be to show the country that the Government's claims that they are committed to the National Health Service are false. This is not an isolated measure; it is part of the calculated attack on the National Health Service which began a couple of years after the Government came to power.
Wolverhampton's local authority and, I am sure, authorities in the greater part of the country know to their cost that from 1982 onwards the Government have been reluctant to invest the money that is needed in the service. In the past two or three years there has been a campaign of intense destabilisation of the NHS. The Government have invested in it, but they must have realised that they were not investing enough resources to meet the demands of hospitals.
Throughout the past year people in my area, although desperately ill, have been turned away from hospitals. There have been deaths every week because GPs have not been able to admit seriously ill patients to hospital. There


have been cut-backs in all the acute specialties. GPs, consultants and hospital authorities cry out that they cannot meet the demands made on their services. District and regional health authorities have been told that they must run services with the available money, even though they know that it is not enough to meet the need.
A fundamental question is are the Government truly committed to maintaining, supporting and cherishing the National Health Service? The answer must be no. This legislation and the coming White Paper in the autumn are all stages in the process of destabilisation and the creation of a two-tier health system.
A false premise lies behind most of the decisions and policies of the Government. It is to be seen not only in the Health Service, but in education and housing. The Government continually pursue division, trying to drive a wedge between people and pit them against each other. A Government truly acting for the people would try to nurture policies that would unify them.
Earlier in the debate I said something that must be true and with which Conservative Members must agree. We all shared the terrible grief at the tragic explosion in the Grand hotel in Brighton. Did any of the people who were taken out of that hotel and placed in ambulances ask which hospital they were being taken to—National Health or private? Did they ask what sort of treatment they could expect? The truth is that they were grateful to be taken to a hospital in which they would get immediate treatment.
I am not talking about people planning months ahead to have tennis elbow treated or a wart removed. I am talking about real illnesses—

Mr. Couchman: No one has ever suggested that the private sector can possibly replace all that is provided by the National Health Service. Why will not Opposition Members see the complementary nature of the relationship between the private health sector and the NHS? By relieving pressure on what is known as cold or non-urgent surgery, the private sector makes its most valuable contribution to the acute services of the NHS, so that people on NHS waiting lists wait a little less.

Mr. Turner: I contend that this measure does nothing but weaken the resources of the NHS, and that it will have no impact on the vast majority, who are taxpayers. Most people in Conservative Members' constituencies and in mine do not want to take out a subscription to BUPA or join a private medical insurance scheme. They want the Government to do what is necessary to build up the NHS, to which they contribute through their taxes week by week.
Most of the queues of patients waiting for treatment are not affected by the clause. It is another signpost on the route which leads to further divisions between people and creates more disunity in the NHS—even though the measure is claimed to assist people over the age of 60.
The good news is that this will not wash. I should have thought that by now Conservative Members would have understood from what happened last week and from what people tell us every day that the country wants a National Health Service for everyone, and wants the Government to commit the resources to make that possible. This Government will not do that, but at the next election we

shall return a Labour Government who will do what is necessary to reunite the Health Service and give a better deal to all who are ill.

Mr. Andrew Mitchell: I shall be brief, and at the outset I apologise for having been absent for much of the debate, having been involved unavoidably at other meetings.
I shall comment on several of the points made by the hon. Member for Wolverhampton, South-East (Mr. Turner), whose sincerity I accept. The argument that he adduced about our having attacked the NHS in the last 10 years will not wash because, as the Prime Minister pointed out earlier today, for every £1 that was spent 10 years ago, £3 is spent now. That cannot be described as an attack on the NHS.
The hon. Gentleman would do the Committee a service if he would investigate the issue and establish the pressures on the NHS which make it important for us to get extra funds into the service, and achieving that, at least in part, is an aspect of the discussion we are having now.
The hon. Gentleman spoke about what he called a hidden agenda for privatising the NHS. He is not alone in saying that. Many doctors are saying it to their patients. If he looks with sincerity at what is being said on this issue by Conservative Members, he will find that there is precious little argument in favour of privatisation.
Many Conservative Members have no health insurance and have relations working in the NHS—my wife is a junior hospital doctor—and have a tremendous love and abiding respect for the NHS and those who work in it. I assure the hon. Gentleman that privatisation is not on the agenda. If he is talking about mounting a campaign on the subject, I will join him on the barricades, but it is a non-issue.
The hon. Gentleman talked about our determination to weaken the NHS, for example, by the clause that we are discussing. But in the next breath he said that for the vast majority of our constituents the legislation would have no impact. It is important to recognise that hon. Members in all parts of the Committee want the NHS to be expanded and improved. Opposition Members are making heavy weather of the clause. It is not a major part of the Budget or the health review. It will make a modest contribution and have a beneficial effect at the margin.
As I reflect on correspondence that I have received in the last two years from constituents who will be affected by the clause, I think of the position of those who leave their firms and retire, having had the benefit and protection of a good health scheme while they were in employment, only to be exposed on retirement to the full market cost, at a stage in their lives where premiums rise steeply. As I say, this is a modest proposal which will go some way to alleviating the problem of that group of people.
My hon. Friend the Member for Gillingham (Mr. Couchman) said that the clause would be helpful to the NHS because it would remove responsibility for some elderly people, an area of care which is rapidly expanding. We appreciate the problems that are caused by the increase in the number of elderly people in the population. Magnificent medical advances have meant that many of our elderly constituents are living longer.
The measure that we are discussing will make substantially more money available for the NHS at a time


when the NHS is battling to help as many elderly people as possible—because many thousands of people will take advantage of the form of insurance, thereby taking themselves out of the NHS.
We have reached the stage when much of the care of the elderly already occurs in the private sector. I hope that Labour Members will get rid of the absurd shibboleth they have about private medicine. I put it to Labour spokesmen that perhaps in the next review of policy following the next general election, when they are considering the reasons for their defeat, they might put their attitude towards private medicine on the agenda for discussion at that time.
We are discussing a sensible proposal, but it seems to contain a small illogicality. If elderly people are to receive tax relief for an insurance premium, why should they not receive tax relief on medical bills that they pay themselves?
Having voiced my concern about that one illogicality, which I hope the Minister will examine on a future occasion, I support this proposal, which will make a modest contribution, and the effect of which will be entirely beneficial.

Mr. Battle: It will be widely accepted in all parts of the Committee that there is deep uncertainty and unease about the Government's intentions for the future of the NHS. Perhaps that is because historically the service has not been with us for all that long. Many people remember what it meant to have to arrange to pay for the best of health. Because of that, people are worried lest, before the system has been developed to its absolute best, the Government try to privatise it.
Throughout the debate we have heard Conservative Members try to argue both ways. On the one hand they say that they are fully committed to the NHS, and on the other they agree that they are committed to the principles of private health care. That is particularly demonstrated, we argue, when measures to support private health care undermine the NHS. The Financial Secretary must tonight spell out whose intentions lie behind the clause. Has what is proposed been squared with the Secretary of State for Health? Is it just a Treasury device that fits into the Finance Bill? Or is this simply the prejudicial preference of the Prime Minister?
Although the hon. Member for Gedling (Mr. Mitchell) said there had been little argument in favour of privatising the NHS. shortly before he came into the Chamber I heard the hon. Member for Maidstone (Miss Widdecombe) try to make the case for a full blown medical insurance tax relief system, which I regarded as an argument for displacing, if not replacing, the NHS.
Others have tried to soften the blow by suggesting that the measures in the Budget are about helping pensioners. That is surprising when one recalls that the same Treasury spokesmen deal with the DSS, and later I shall speak about the way in which they have dealt with pensioners, not least by not uprating their pensions properly and by reducing the rates of housing benefit.
The general public are no longer sure whether the Government intend to shift health to the private sector, leaving behind only a residue of the NHS that we have known, or whether they intend genuinely to defend and extend the service.
The Chief Secretary said that the Government had no intention of going further than the clause in supporting tax relief for private health. I take assurances such as that with a pinch of salt because I remember, for example, the

promises in the Conservative election manifesto to the effect that the child benefit level would be paid "as now". We discovered that that was meant literally, and therefore has been frozen for two years. We cannot rest secure in the Prime Minister's promise that the NHS is safe in Conservative hands because it seems from a report in The Independent on 15 April that there are pressures on the Government to extend tax relief in the private health sector. The article said:
The government is being pressed by some of its closest advisers on the National Health Service review to extend further tax relief on private care … Two proposals are being put forward: one to allow people over 60 who pay for treatment to claim relief; the other to allow the creation of special tax-free savings plans through building societies or other routes for private health care. The former move in particular could significantly increase the private health ca re market. For example, for a £4,000 hip replacement, those over 60—or the patients' relatives paying on their behalf—could reclaim £1,000, or £1,600 if they pay higher rate tax. The ideas have been put to officials by Dr. Michael Goldsmith, medical director of Medisure, the medical insurance advisers, who helped form the idea that GPs should become budget-holders able to buy hospital care; and by David Willetts, director of the Centre for Policy Studies, the right-wing think tank, who has been a key government adviser on the NHS changes.
According to the article, Mr. Willetts said:
I hope that tax relief will not cover just insurance, and that it will cover any direct payment mechanism. I would like to see mechanisms in which you would have tax relief on any of your own directly paid costs.
The article continued:
That could come, for example, if individuals used their savings to buy non-urgent health care.
Mr. Willets added:
I hope that we will get this through".
The Government should make it plain whether this is the last measure of its kind. Did the Financial Secretary mean it when he said that clause 51 will be the only relief on private medical insurance, which we believe undermines our National Health system? I agree with the hon. Member for Epping Forest (Mr. Norris) who has been quoted today as saying that this is a dangerous precedent, taking us on the easy steps to a two-tier Health Service. This is not simply a matter of tinkering at the margins, as the hon. Member for Gedling said. This is a case of eroding the fundamental principles of the NHS, one of which is that it should be free to all at the point of use according to need. In other words, it does not depend upon a price and privilege model of health care in Britain.
One of the key phrases that could be used to describe the NHS is that it is a comprehensive service. The whole point of private health care is precisely that it is not a comprehensive service. That is especially true for the elderly, and that is why clause 51 is so strange. For a serious operation or long-term care an elderly patient will have to turn back to the NHS. The chief executive of BUPA has claimed that
Chronic illness is not a suitable subject for insurance.
And the Private Patients Plan no longer includes "long term illness" as suitable for insured treatment.
The 1986 general household survey shows that, far from this being a great boon to pensioners, only 4 per cent. of people over the age of 65 have any private medical insurance cover and only 1 per cent. of pensioners from skilled or semi-skilled manual categories are covered by any private medical insurance. No unskilled manual worker pensioners are covered. If this is a measure to assist pensioners who need help, it does not work—on two counts. It is not helping the poorest, and it does not help


their health needs when most are in need of substantial treatment because they come into the categories of chronic or long-term illness. It is exactly at that point that they have to switch back into the NHS.
Will the Minister confirm that 52 per cent. of the in-patient stays of people of all ages with private medical insurance are on the NHS? Private health insurers specifically exclude most of the pre-existing medical conditions and chronic conditions such as arthritis, senile dementia or loss of mobility—precisely the complaints from which most pensioners suffer. Sixty per cent. of people aged between 65 and 74 are classed as having a long-standing illness, and that figure rises to 69 per cent. for people aged over 75.
How on earth can this measure be said to be helping pensioners in their old age to receive health care? Even if they are wealthy enough to benefit from the tax concession, they will have to fall back on the NHS. This is supposed to be a health care measure, but it would be better to put the resources into the NHS rather than subsidising commercial medicine, which itself lives off the NHS, using its trained staff, facilities and resources. That should be taken into account when we evaluate the relationship between the NHS and the private sector. The Government do not have a mandate for private health care in Britain.
I was interested to debate at the weekend the state of the world today with a Conservative. He suggested that there are only two categories of people in Britain—the investors and the wasters. If that is the kind of outlook of the Conservative party, it, sadly, will write off millions of people in our society who do not earn enough to be investors. We are now being told that we must invest in our health care otherwise we will be wasters.
8.45 pm
Many pensioners, certainly those who I represent, know exactly where they stand on clause 51. They will not be coming to my surgeries to welcome being given the choice to move into private health care. I suspect that they will say that if the Government want to assist pensioners, rather than sales talk for private medicine they would prefer a decent pension. They would have preferred their pensions to have been uprated last year according to the right rate of inflation, not that in October, as a result of which their pensions went down this year. They would also prefer to receive full housing benefit which has been cut for the past four years. That way pensioners would have a decent income and be able to make real choices about their lives rather than see the wealthiest being offered incentives via subsidies in private health companies.
Some Conservative Members have said that this is a marginal measure which does not involve a great amount of money. If that is true, is it worth the trouble that will be caused by the possibility that this measure will open the door to subsidies for private health care? I urge Conservative Members to reject this measure and demonstrate their faith in the NHS. They should show that it is a marginal measure, not by removing the measure altogether but by suspending it now so that it can be put to the test at the general election. I hope that hon. Members will support the amendment and oppose clause 51.

Mr. Anthony Coombs: Unfortunately, I have not been able to listen to all of what I am sure has been a fascinating and varied debate. However, what I have heard so far underlines my impression that the Oppostion parties' reaction to a pragmatic, limited and sensible measure is precisely the knee-jerk one that they seem to reserve for those people who dare even to think of providing for themselves rather than relying exclusively on the state.
Not only do the Opposition reject, purely for ideological reasons, measures which will inevitably increase the total resources going into the health sector, and attempt to deny the long-term and well-established trend which shows that people want to provide for their own demands, whether in housing, education, share ownership or pensions—which, as has been said, extends even to some trade unions—but, sadly, by arguing for a delay to 1993, they refuse to recognise the urgency of the demographic changes and the demand that they will create on the resources of the Health Service. To meet this a variety of funding mechanisms will inevitably be required, despite the massive increases in this Government's funding of the National Health Service.
The facts are there. Even at the present time 50 per cent. of NHS beds are used by people over the age of 60 and no less than 40 per cent. of the resources expended by the NHS are spent on elderly patients. By the year 2000 the number of people over 65 will have risen from 9 million to 10 million, the number of people over 75 will have increased by 43 per cent. and, according to an article in The Economist on 25 March this year, the number of people over 85 will have doubled to no less than 1 million.
These health demands will not go away. They will continue to impose themselves on health services per se in both the public and the private sectors throughout the country. Everything that we can do to ensure that state money brings forward additional finance from the private sector will help us to meet the inevitably burgeoning health demands resulting from the demographic changes that I have described.
It is obvious, as my hon. Friend the Member for Gillingham (Mr. Couchman) has said, that the provision of tax relief in this area, even assuming a rough balance between premium payments and treatment costs and a 10 per cent. administration levy by insurance companies on whose premiums tax relief will be available, and even assuming exclusively the top rate of tax, will mean a net gearing for Government funds which otherwise would not have been available of two and a half and, even at basic rate tax, possibly four times.
It really is nonsense to say, as the Royal College of Nursing does, that the demand for resources for the care of the elderly into the next decade is likely to become increasingly acute, and at the same time to put forward on purely ideological grounds the antediluvian argument that by denying choice to some will increase choice for everybody; that even though the 330,000 potential National Health Service patients who may take advantage of this scheme may only rely upon it for certain services, their doing so will do nothing whatsoever to increase the opportunities in the National Health Service for the less well-off who have to rely upon it exclusively. Logically, those opportunities must be increased, and to argue against that is to argue against the interests of the less


well-off patients who are at present waiting for operations which they would otherwise be able to have far more quickly.
The proposal has other advantages. As has been agreed by Help the Aged, the elderly in this country inevitably become wealthier and have more disposable income. This scheme should eventually increase competition and therefore cost effectiveness in the private health sector. It is worrying that 80 per cent. of treatments in the private sector are at present carried out by three companies and 50 per cent. by one alone, BUPA.

Mr. Battle: Would the hon. Gentleman then explain to me why Help the Aged is opposed to this proposal?

Mr. Coombs: Help the Aged approaches this proposal on precisely the kind of anachronistic ideological grounds as the Opposition. Yet at least Help the Aged recognises that an increasingly wealthy elderly population will demand the kind of services that other people have been able to demand over the last 10 or 20 years. I think that we ought to give them the opportunity rather than try to deprive them of it as the Labour party no doubt would.
Quite obviously, these proposals will increase demand within the private health sector and, as a result, the range of treatments offered by that sector is likely to increase, further reducing demands upon the National Health Service. They may also well improve preventive health care in the private health sector and thus lead to the wider introduction of services such as health check-ups and well men and women clinics, which at present are provided almost exclusively in the public sector. As a result, public sector health resources will be concentrated more accurately on those who most need them and who cannot afford to pay for them themselves.
I believe that these proposals are pragmatic. They go some way towards meeting an increasing need which will increase still further in the future and they provide for further resources with which to look after an increasingly healthy elderly population and enable it to improve further its own standard of living.
I would like to see these proposals go further. There is a case for the increasing number of people over retirement age who continue to work and who at present have their insurance premiums for private health care paid for by their companies to have these disregarded as taxable benefits.
Secondly, these proposals ought to extend not only to those pensioners with taxable earnings but also to those who have accumulated tax allowances. That would give us a successful scheme which I believe would have an enormous take-up, given the fact that this kind of health insurance after tax relief will make possible health care for £3 per week. That large take-up will enable elderly people in this country to emphasise their rejection of the ideological, Luddite, anachronistic arguments that we have heard from the Opposition Benches tonight.
I therefore support this scheme and shall have great pleasure in voting against the amendment.

Dr. Kim Howells: The arguments of the hon. Member for Gillingham (Mr. Couchman) and other hon. Gentlemen have sought to prove that the £40 million relief funded under this clause will not drain the Health Service of resources but will strengthen it. I believe that in many ways what they have said is at the heart of this debate. The Opposition are seeking to argue that no one,

rich or poor, young or old, should have to worry about having access to the very best in health care as represented by a strong and dynamic NHS, an NHS, moreover, which refuses to discriminate as to who it will and will not treat and stands as a model of care and medicinal excellence in a civilised modern society.
I do not believe that the provisions in clause 51 will shake the financial roots of the NHS. They will serve, however, to promote some fear and jealousy and a good deal of uncertainty in the minds of many who depend upon the NHS but whose lack of income in the form of the receipt of wages or pensions places them outside the ranks of those who stand to gain from clause 51.
In south Wales it will serve to deepen existing suspicions that these provisions are intended to help drive another nail into the coffin of the NHS. I do not expect the Government to understand that. They should understand it, though, because it was shouted at them time and again during the Vale of Glamorgan by-election. But I fear that the Government have become so arrogant, so sure of the infallibility of the increasingly mystical goals which are proclaimed from No. 10 Downing street, that they can no longer understand good advice or warning messages, let alone sheer criticism. But I heard those messages time and again during both the recent south Wales by-elections. The Government's goals may not have been quoted back at me word for word in the form in which they appear in clause 51, but people could recite without difficulty the philosophy that inspired them.
9 pm
I am new to the House, so my right hon. and hon. Friends will forgive my observation that I am startled that experienced and ambitious politicians such as those who were seated on the Government Front Bench earlier—young politicians even—are prepared to mortgage their political futures to legislation that is as wrong-headed as that encapsulated in clause 51. There can be only one explanation, which is that they have mortgaged themselves to such ideological nonsense in the vain hope of currying favour with the Prime Minister.
I bet that a few of them do not sleep too well at night—not necessarily because they are worried about the future of the Health Service or of its patients, but because they heard the shuffling of feet and the drawing of daggers in the darkness behind them. They heard the impatient, dismissive growls of the former Defence Minister, the right hon. Member for Henley (Mr. Heseltine), as he seek s platforms to argue for a more corporate attitude to state intervention, on Japanese lines.
Other Conservative Members heard the public plea, "It's got nothing to do with me, guy" from the present Secretary of State for Wales as he rushes from press conference to press conference stealing local authority initiatives and calling them his own, and doing everything that he can to convince the Welsh people that, like the right hon. Member for Henley, he is at heart a state interventionist. I have no doubt that Conservative Members wake in the night wondering how they can ditch that mortgage and survive when their political backers are put out of business.
How much better it would be if their nights were disturbed by misgivings, not about their political futures but the likely implications of clause 51 for the future provision of health care in constituencies such as mine. In my constituency, large centres of population are unable to


afford the luxury of properly equipped, modern health centres. Clause 51 will not help to get them built. It will not help a community such as Tonyrefail in the north of my constituency, which cannot by any stretch of the imagination be called wealthy, but is full of hard-working, respectable people who have always sought to pay their way in life. They are people who have paid their national insurance stamp for decades and who display enormous patience and forbearance in tolerating an underfunded local health system.
Last Saturday, a constituent of mine from Tonyrefail who is employed at the Royal Mint at Llantrisant—one of the most modern money factories anywhere in the world—told me that the people of Tonyrefail are desperate for a modern health centre. I asked him where the doctors there hold their surgeries now, and he told me—in the converted front rooms of terraced houses, as they have done for the past 30 years. That is an indictment of a decade ruled by the present Government.
The Chancellor of the Exchequer has squandered £60 billion of oil revenue, yet a hard-working, respectable community such as Tonyrefail does not have a modern health centre. Nor do many similar communities in my constituency boast their own health centre. The people of south Wales have grown used to the Government preaching the gospel of private provision in all kinds of sectors. We expected something like clause 51, and we fully anticipate that it will result in future shortcomings similar to those we have experienced in other vital sectors such as education, training and environmental control.
We witnessed at first hand that it is one thing to legislate for the private sector to provide an accessible, dynamic and comprehensive service to the general public, but it is another to convert that legislation into real results. As we have witnessed all too often in the case of the citadels of ideologically inspired government in eastern Europe, when good practice and common sense are shunted aside in the name of a political creed, it is the service and the people who suffer—as the people of Poland, Hungary, Romania and the Soviet Union are suffering now. The commissars, big-shot bureaucrats and hustlers can afford visits to private clinics in Switzerland or to private hospitals elsewhere for treatment. That scenario is one with which we in this country are becoming increasingly familiar. The chief commissar of Downing street, for example, boasts of her ability to choose dates, doctors and hospitals convenient to her. That was an insensitive and vulgar exhibition of the Prime Minister's lack of comprehension of the situation in which most of my constituents languish when they find themselves in need of surgery that is not considered urgent or of top priority.
The majority of my constituents have neither the personal wealth nor the facilities available to them to exercise a similar degree of choice. Nor do they have something else that the Prime Minister has—thank God. They do not possess that vulgar streak of exhibitionism that drives the right hon. Lady to flaunt her wealth and position and to boast of it in the midst of a society still fraught with long hospital waiting lists and in which respectable communities such as Tonyrefail are denied even the provision of basic facilities such as a health centre.
That is the real meaning of clause 51. It is another version of the Prime Minister's boast, another reprise of

that increasingly stale melody that Conservative Members continue humming as they mortgage away their political futures. Clause 51 is another insensitive and vulgar gesture in the face of the vast majority of people, made at the same time that the minority are urged to celebrate their good fortune. Clause 51 is saying to them, "Rejoice, rejoice. Celebrate the fact that you're not someone who has to join the queues for surgery or suffer means-testing to enjoy even the most basic medication and health care."
More than 500,000 people are covered by the Mid Glamorgan health authority and they will not stand by in silence as its £149 million revenue allocation is whittled away and scattered around the shrine of the Government's barmy ideology. Those people made their voices heard last February in Pontypridd when the Tory vote slipped to third place behind the nationalists, and again last week in the Vale of Glamorgan, when the Tory vote dropped straight into the Bristol channel.
If I am to be candid, a part of me hopes that the Government will not modify legislation such as clause 51, because in that way their support will be eroded as it was even in an area such as the Vale of Glamorgan, which voted Conservative for the past 38 years. The public understand only too clearly the intention behind clause 51 and its ilk. It is not about improving the Health Service but about ditching responsibility for a symbol of collective care and of community.
The Prime Minister has made public her distaste for anything that smacks of community responsibility. If she is to surpass the vulgarity of her previous odes to the virtues of private medicine, she need only remind the public that if they find themselves unable to afford adequate health care in the privatised future, then they can chew aspirins. Supermarket shelves are full of them, and they are manufactured by the same transnational chemical corporations whose products poisoned us in the first place.
My constituents complain frequently that they need to take aspirin to counteract the pain that the Prime Minister's speeches and those of her Ministers give rise to in their heads—and in other parts of their anatomy a long way from their heads.
This year, Mid Glamorgan health authority's entire capital allocation is a little more than £7 million. The £40 million given away by clause 51 could solve a lot of problems that will not be solved because of the existing limit on that health authority's capital allocation. In my constituency there is a desperate shortage of nebulizers, for example, for the very young and very old suffering from asthma—as my own son does—and from pneumoconiosis and other respiratory disorders. They cost about £100 apiece, but many families in my constituency earn far less than £4,000 per year.
My constituents want to hear something more relevant to their needs than these hymns to private insurance. They want to know why the east Glamorgan hospital has not been replaced yet. It has 500 beds and its fabric is deteriorating rapidly. This Government's indecision on its future is causing demoralisation and great unhappiness among east Glamorgan's most excellent staff. They do not want this kind of irrelevant, divisive legislation. They want to hear the Chancellor make it abundantly clear that the Exchequer does not grudge the allocation of extra funds to promote health care at all levels for everyone in this country, and not simply for those who can afford it. That is the way to promote efficiency, well-being, a sense of civic


pride, a sense of belonging to a responsible, modern nation. Slapdash temporary buildings, patched-up wards and dependence on charity for purchasing vital medical equipment are not symbols of a responsible Government and certainly not symbols of a Government who care for the people.
The health authority in my area sighs with desperation and disbelief when it sees legislation such as this. The general manager informed me today that he needs funds for hospital redevelopment, for building maintenance, for investment in community care services, to make progress on their strategy in dealing with mental health problems and for general investment in new technology. We have dire problems of finance for our geriatric units at Dewi Sant, Tonteg and Rhiwfelin hospitals. The Hensol hospital for the mentally ill needs refurbishing and re-equipping, as does the Talygarn rehabilitation centre, which does such sterling work in returning the injured and disabled to meaningful employment, where they can help to top up the tax revenue collected by this Government.
Clause 51 will do nothing for the hospitals and health care in my area of the Mid Glamorgan health authority; nothing constructive, that is. It will simply confirm what my constituents know already, that this Administration lacks the basic decency which refuses to allow those who possess it to flaunt their new clothes publicly, like a kept tart, and kept this Government have been: kept by the windfall of oil revenues, by a mean, parsimonious, grasping ideology, which takes from the weakest and rewards the strongest, as this clause seeks to do. However, it will not be kept for much longer. The people of Wales know that and the word is out. This Government and their vulgar, tasteless clause are on the way out. That is why I support the amendment tabled by my right hon. and learned Friend the Member for Monklands, East (Mr. Smith), and I hope that the Committee will as well.

Mr. Beith: I had the opportunity earlier in our proceedings to talk more generally about our objections to this clause and my hon. Friend the Member for Ross, Cromarty and Skye (Mr. Kennedy) developed those arguments. I want to pick up one or two points referring specifically to amendment No. 21.
The hon. Member for Wyre Forest (Mr. Coombs) has left us again, after a brief appearance in which he sought to comment on a number of speeches he had not heard, which was a pity because if he had listened to the hon. Member for Beaconsfield (Mr. Smith) or even the hon. Member for Eastbourne (Mr. Gow), with whom I usually find myself in disagreement—

The Financial Secretary to the Treasury (Mr. Norman Lamont): The hon. Gentleman was not here when my hon. Friend the Member for Eastbourne (Mr. Gow) spoke, so how does he know?

Mr. Beith: I was very sorry, during a brief absence, to miss what may have been the first speech of his I have agreed with for a long time.

Mr. Lamont: I have never heard my hon. Friend the Member for Eastbourne speak without referring to the absence of the Liberals, which is normally his theme.

Mr. Beith: It is a very old sport between us, and I am sorry that he is not here now to hear the Minister make that point.
What the hon. Member for Wyre Forest did not appreciate was that the objections to this clause and the reservations about it are not of the narrow, ideological kind which he sought to suggest, but extend into his own party, for the very good reason that the idea of subsidising private health insurance is one to which there are many well-based objections.
A number of Government Members have spoken as if the argument were about whether people should be permitted to take out private health insurance. It is not—certainly not so far as I am concerned. It is about whether taxpayers in general should subsidise those who make this particular choice, and do so particularly at a time when, if the purpose of this is to devote revenue to the Health Service, that revenue could more usefully be devoted directly to the Health Service, and if it were, it would benefit more of those people in greatest need. When they argue that more money is becoming available for health care as a result of this clause, they seem to neglect the fact that it gives more money to health insurance for people who have already got it, and the vast majority of funds in the coming year will go to people who have already made the decision to take out private health insurance and do not need this clause to induce them to do so.
Ministers have made great play of the argument that the main purpose of this proposal is to enable people to continue to have the private health insurance which they began when they were in employment, rather than to extend it, but alas I cannot believe them because it is clear from many speeches today that the spirit behind those within the Conservative party who like this clause is to extend this principle far more widely.
Another Government Member argued that it is illogical simply to devote the tax relief to health insurance. It should, he argued, be extended to treatment as well, and I can see his logic that if there is to be a subsidy for public health insurance, why not put it direct to the treatment, to the person who has not got health insurance and is told that his only chance of a hip operation is to go private, otherwise he will have a long time to wait? Why should he not have the benefit of tax relief?
9.15 pm
Once this gate is open there is no limit to it, which is why Government Members should take more seriously the argument that the direction of these funds into the Health Service is a more cost-effective and better-controlled way of using them.
Referring to amendment 21, it seems to me entirely illogical that the Government should feel it neccessary to extend this tax relief even to the extent of top rate tax. Ministers have admitted this afternoon that 50 per cent. of the relief coming out of this clause will go to 20 per cent. of the beneficiaries. They have argued that 80 per cent. of those who benefit from it will be on the standard rate of tax, but 50 per cent. of the relief will go to that 20 per cent. paying top rate tax. To do this, the Government must have the machinery to allow these people to reclaim tax at the higher rate, and it would be cheaper administratively, as well as in terms of the relief being afforded, to exclude the top rate of tax from the provisions of this clause. I see no reason at all why the Government should not accept amendment No. 21.
I do not think that I could find very many pensioners in my constituency who regard this feature of the Budget


—or any other, for that matter—as helpful to pensioners. They will see it as further confirmation that the Government want the Health Service to develop on the basis that those who can afford to will be well advised to make some other provision for themselves, and will be helped to do so. That is not the kind of Health Service in which I believe.

Mr. Nicholas Brown: Unlike many of those who have spoken in this debate, I have been able to attend the entirety of it, as indeed has the Government Front Bench. That is the way things work in this place, and quite right too. It is only fair that I confide to the Committee that the purpose of our amendment, although it only implies a delay in the implementation of clause 51 until 1993, is, of course, to do the clause in altogether. We anticipate winning the next general election, and the Labour party is certainly winning the by-elections.
The Committee has had a good trawl through the claims which the Government have made for the measure contained in clause 51, and essentially the Government's case has come down to two separate propositions. The Government claim that the scheme will help people who have had private health care cover during their working lifetime to continue with private medical insurance into retirement, when, as the Government have acknowledged, incomes fall and private medical insurance premiums rise.
The second, separate proposition which the Government have advanced for clause 51 is that it will reduce pressure on the National Health Service. As far as this side of the House is concerned—certainly as far as the Labour party is concerned—neither of those propositions has stood up to the scrutiny of today's debate. We regard the scheme contained in clause 51 as unfair, expensive and socially divisive, about which even those who genuinely support the Government have reservations. We were not surprised to learn from what I think are described as "the usually informed sources" among journalists, that initially the Secretary of State for Health and, indeed, the Chancellor strongly opposed the measure, and I find the denials that have been offered wholly unconvincing.
Many Conservative Members consider the proposal the first step towards more significant and far-reaching changes, seeing it as the starting point for a two-tier Health Service in which better-off citizens enjoy private medical care and separate, diminished provision is made for the rest of us. The hon. Member for Horsham (Sir P. Hordern), indeed, saw it as a starting point for other tax reliefs—applying, for instance, to private education—and said that he would never support that.
The Chancellor would have reasonable and understandable grounds for less than wholehearted enthusiasm about the scheme. My hon. Friend the Member for Clydebank and Milngavie (Mr. Worthington) pointed out that the right hon. Gentleman is trying to thin out the range of tax allowances available to be offset against income. Now, however, he is being forced by the Prime Minister to acquiesce in the introduction of a whole new range of income tax reliefs. The scope for tax avoidance is clear, and it makes nonsense of the Government's efforts to thin out some reliefs and cap others.
Much tax avoidance relies on a detailed knowledge of taxation regulations and an ability to fit the different bits

together in such a way that losses can be offset against what would otherwise be taxable real earnings. Those who seek to reduce the scope for avoidance by cutting the number of reliefs available are fighting a losing battle against those who exercise real power in the Conservative party.
That should come as no surprise to anyone. The Conservative party is prepared to tolerate the abuse of the business expansion scheme and to allow the potential, indeed actual, avoidance in personal equity plans. It is willing to countenance a tax regime under which somebody earning £1 million a year could theoretically, if he made use of all the available allowances, pay no tax at all. In those circumstances, is it surprising that the Government are willing to acquiesce in this whole new territory for abuse—tax relief for private medical insurance?
I understand that even their own supporters have asked the Government to narrow the regulations as far as possible and to restrict the scope of the scheme. The political implications are obvious: tax concessions for the rich and a two-tier Health Service for the rest of us. The offer of tax relief is clearly of particular advantage to the better off. As my hon. Friend the Member for Renfrew, West and Inverclyde (Mr. Graham) has pointed out, it is they who need further financial concessions the least.
There was a rather ungainly scrap at the beginning of the debate: the Chief Secretary seemed astonishingly reluctant to confirm the facts contained in a parliamentary answer given by his right hon. Friend the Financial Secretary. I think it would be helpful if I read out that answer, in which the right hon. Gentleman told my hon. Friend the Member for Dunfermline, East (Mr. Brown):
Tax relief on private medical insurance for the over-60s will not be available until 1990–91, when about 330,000 tax units (single people and married couples) aged 60 or above are expected to qualify for tax relief on medical insurance. The average subscription per tax unit is estimated to be about £400. Around one half of the cost of relief is expected to be received by higher rate taxpayers."—[Official Report, 22 March 1989; Vol. 149, c. 588.]
I am surprised that the Chief Secretary found it difficult to stand up and say, "Yes, that is correct." Perhaps, however, his difficulty was understandable, as the social divisiveness of the proposal is something that the Government are trying to minimise.
According to the Government, about 90 per cent. of the cost of the scheme will be attributable to those who already have private medical insurance. In other words, it is a straight concession to people who have already decided to make such provision without the incentive of tax relief. The implication is that only 10 per cent. of the estimated cost is to be laid at the door of those who find the new tax allowances attractive. That is the "year one" position, and that is the key to the Government's thinking. Why on earth make all the elaborate arrangements for deduction at source for the person making the payment, along the lines of the MIRAS scheme? Why ensure that higher-rate taxpayers obtain their rebates through adjustments of their PAYE codes if the measure is to have only marginal consequences? Why put such arrangements in train if the long-term implications are not extensive or important?
These are the kind of arrangements that would be introduced for a scheme that was intended to be used widely and to become commonplace in the British income tax system. That is incompatible with the claim made by the hon. Members for Fulham (Mr. Carrington) and for


Gedling (Mr. Mitchell) that this was not to be treated as any great event. I hope, incidentally, that the wife of the hon. Member for Gedling remonstrates with him when he gets home and she finds out what he has said tonight.
The Financial Secretary has told the Committee that the average subscription per tax unit is estimated to be about £400. That figure assumes the take-up set out in the parliamentary answer that I read out earlier. BUPA tells us, however, that the full cost for a pensioner couple can be as much as £2,160 a year, out of which the public will now have to finance payments of up to £860. It is not all as high as that, of course. BUPA claims that the cost of comprehensive cover when the older partner is over 70 will be £1,102 a year, cut to £827 by standard-rate tax relief.

Mr. Win Griffiths: To do a little fine tuning on BUPA's description of its insurance scheme, will my hon. Friend confirm that when BUPA talks about "comprehensive cover" it actually means cover for certain specified types of illness, and that anyone suffering from an illness cannot obtain insurance cover?

Mr. Brown: That is correct. BUPA operates a range of different schemes. I understand that the Government are to introduce regulations that will also limit the extent of insurance reliefs. BUPA offers what it calls a low cost scheme in which payments are restricted. Annual premiums under that scheme will be cut from £655 for a couple to £491 by standard rate tax relief.
Those are large sums, and it is difficult to see them as being comparable with the small sums mentioned in the parliamentary answer. For those searching in the bargain basement of private sector health care insurance there is a new senior prime care scheme—it sounds more like beef than health care—which offers a substantial no claims discount of 27.5 per cent. for those aged 65 or over. Of course, that is capped at age 75. The cost of that would be £458·20 per annum for a couple.
The assumption that must lie behind the Treasury estimate that the Financial Secretary gave to the House is that a small number of pensioners will opt for cheaper schemes. That assumption is surely wholly at variance with the arrangements that the Government are putting in place to handle the relief. Either the Government believe that this is the right thing to do and they want to encourage as many people as they can to take part in it, or they believe that it is small beer and nothing to get worried about. They cannot make both arguments, as they have tried to do in the debate.
My hon. Friends the Members for Burnley (Mr. Pike) and for Halifax (Mrs. Mahon) emphasised that the scheme will do the Health Service no good and will certainly do it harm. If the Government had £40 million, or £200 million—the commitment is open-ended—to spend on health care, it should have been spent on the National Health Service so that everyone could benefit. There is no need to spend it on some citizens rather than on all. Depriving the National Health Service of the money does it harm. The private sector will not train nurses or provide long-term patient care. The private sector will not relieve pressure on National Health Service waiting lists and queues. The objective of the private sector is only to ensure that its clients can jump the queues by virtue of being private patients.
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My hon. Friend the Member for Wolverhampton, South-East (Mr. Turner) made the point vividly that a Government that cared equally for everyone would try to reduce waiting lists and ensure fair and equal treatment for all patients regardless of their economic circumstances. The Government are exacerbating the problems, not eliminating them. They are saying that the wealthy should have preferential treatment in health care. What use will the scheme be to the poor and the majority of British pensioners who do not pay income tax and cannot benefit from tax relief?
The majority of pensioners have no prospect of having their private sector health insurance premiums paid for them by wealthy relatives. The Chief Secretary tried to suggest that even poor pensioners could benefit if they were lucky enough to have a son or a friend who had become wealthy and was willing to pay for them. In those rare circumstances I suppose that they could benefit, but what are the odds of that happening? I was amazed that no one on the Conservative side suggested that poorer pensioners should think about clubbing together to form syndicates and offer themselves as tax loopholes to wealthy entrepreneurs along the lines of some of the schemes in business expansion projects. Perhaps encouragement of that is some way down the line.
Britain's pensioners will have lived through the second world war. Many of them will have served their country during that war. They will all have paid their taxes and national insurance contributions throughout their working lives. Now, rightly, they believe that they are entitled to the best health care that the country can provide for their retirement. No one on the Labour side sees anything unreasonable in that. The Government are telling them that they can have the second-best health care that the country can provide or that they can take out private medical insurance. The Government echo the highwayman—"Your money or your life." That is a disgraceful, grotesque, unfair and callous message from Britain's most publicised granny.
What is a pensioner who has waited for a hip replacement for perhaps more than two years to think when he sees a privately-insured pensioner having the operation carried out straight away in a National Health Service hospital, using National Health Service facilities, but paid for by private medical insurance? The majority of pensioners who will be in that position will not consider that to be anything but grotesquely unfair. It is the socially divisive nature of the proposal that is its main condemnation.
The cause of delays in National Health Service operations is not administrative. In one local health authority in the northern region consultants were startled to receive a memo from the administrator asking them to refrain from carrying out expensive operations until the end of the financial year. When the consultants protested, they got a further memo asking them to try to carry out cheaper operations until the end of the financial year. Life is not like that, except perhaps for accountants. As my hon. Friend the Member for Pontypridd (Dr. Howells) said in an excellent intervention, health care should be delivered at all levels and not just to those who can afford it. Those sentiments will be echoed by every Opposition Member.
The issue is not solely about resources. Private medical care will not create extra facilities in the National Health


Service; it will redistribute the use of existing facilities. Conservative Members have argued that the private sector is more cost-effective than the public sector. I have some figures showing the comparative costs of operations in the private and the public sector in the United Kingdom. I apologise to the Committee as the figures are a year old, but the differentials still stand.
Depending on the extent of the operation, the cost of a hip replacement operation in the private sector is £1,750 rising to £3,350. The National Health Service bill is a set £3,300. The National Health Service bill for a hysterectomy is £1,200 and the private sector bill is almost twice that at £2,200.

Mr. Couchman: Are the costs that the hon. Gentleman has just quoted for National Health Service treatment in hospitals where the costs are low, high or average? I suspect that the hon. Gentleman may be quoting those figures to present his argument in the best light.

Mr. Brown: The figures were obtained from Hansard on 28 January 1988. They were supplied in a parliamentary answer, so I presume that they were designed to fit the interests of the Government rather than those of the Opposition. If they do not sustain the Government's case, all I can say to the hon. Gentleman is that the truth will out.

Mr. Couchman: The hon. Gentleman will know that one of the complaints, worries and concerns of those of us who follow health care matters closely is that some hospitals within the National Health Service are vastly more efficient than others. Clearly, they are able to deliver more effective and therefore probably cheaper services than other hospitals. It is well known that some of our centres of excellence are comparatively expensive in delivering treatment.

Mr. Brown: The evidence that I am citing shows that the private sector is comparatively expensive, as the hon. Gentleman pointed out. I can quote him the example of a hernia operation. I have a range of figures from the private sector from £660 to £1,270, a separate source gives the cost at £890 and a further source quotes £1,000. Those are all private sector quotes. According to Hansard, the cost in the National Health Service is £650. Those are substantial differences. The hon. Gentleman can say that I have picked the examples that suit me best, but I have quoted all the private sector quotes that we received, not simply the ones that suit my case best. I could have simply quoted £1,270, but I quoted all the figures from every source. Even the lowest quote from the private sector was more expensive than the National Health Service. That underlines my point.
When the Chief Secretary, in a slightly embarrassed manner, hacked his way through what I thought was an unconvincing justification of the Government's position, and knocked lumps off the Financial Secretary in the process, some Conservative Members took part in the debate.
I enjoyed the brave, reflective and well-measured speech by the hon. Member for Horsham (Sir P. Hordern). His was the authentic voice of what used to be the Tory party before the current leader got her hands on it. He weaved compassion throughout his speech.
The hon. Member for Beaconsfield (Mr. Smith) made an able, measured speech urging caution, particularly on taxation. I wholly agreed with him. I shall do him a great deal of harm, but just for once the hon. Member for Eastbourne (Mr. Gow) made a great deal of sense on the points that he raised about taxation. I agreed with what he had to say up to the point when he said that he would vote for clause 51 anyway. There is no need for him to do that, as he is no longer a Minister. He should exercise his independence and do what his heart tells him to do, which is to side with the Labour party. The people of Eastbourne will forgive him—on this occasion.

Mr. John Smith: That is an important qualification.

Mr. Brown: It certainly is in Eastbourne.
My hon. Friend the Member for Kirkcaldy (Dr. Moonie) brought to the debate the voice of a doctor, a professional man who knew what he was talking about. It is interesting that the first interventions in support of the Government came from merchant bankers, as one of my hon. Friends pointed out, but the speech that made the most telling impact came from a member of the medical profession. My hon. Friend the Member for Kirkcaldy pointed out that clause 51 is irrelevant to the nation's health needs. It is designed not to supplement the National Health Service, but to change its nature. My hon. Friend was speaking for the whole of the Labour party when he said that we are implacably opposed to the proposal. We are opposed to it on philosophical and economic grounds, and on the ground of social justice. I urge the Committee to support the amendment and to reject clause 51.

Mr. Norman Lamont: We have had a lively debate in which there have been some strong speeches from Opposition Members and some excellent speeches, not only from those to whom the hon. Member for Newcastle upon Tyne, East (Mr. Brown) referred, but from my hon. Friends the Members for Maidstone (Miss Widdecombe), Stamford and Spalding (Mr. Davies), Gillingham (Mr. Couchman), Fulham (Mr. Carrington), Gedling (Mr. Mitchell) and Wyre Forest (Mr. Coombs), all of whom supported the Government's policy enthusiastically. As the hon. Member for Newcastle upon Tyne, East said, my hon. Friend the Member for Eastbourne (Mr. Gow), after judicious and judicial deliberation, also supported our policy and we welcome that.
My hon. Friend the Member for Eastbourne asked whether clauses 51 to 54 had been discussed with the European Commission. The answer is no. There is no need to discuss the clauses with the Commission, but we have had to take account of EC law in framing the provisions and that relates directly to the point that the right hon. Member for Llanelli (Mr. Davies) made and that he encapsulated in amendment No. 8. One of the benefits of the wide market within the European Community, as he knows, is that the United Kingdom financial services industry has the opportunity to compete within Europe. That opportunity extends to the non-life insurance services on which an EC directive becomes fully effective next year. It is, therefore, right that as long as United Kingdom insurance companies are able to market non-life insurance in Europe, European insurers should be able to compete for business in the United Kingdom on equal terms with British insurers. That is why clause 51 offers the new tax


relief when medical insurance cover is provided by a Community insurer, as well as when it is provided by a British insurer.
The relief at source scheme will not be available when the insurer has no presence in the United Kingdom. In that case, the individuals themselves can claim the relief from their tax office. The benefit of tax relief goes to the person taking out the insurance policy, not to the company.
The right hon. Gentleman also asked about the taxation of insurance companies and provident associations and what happened if they did not pay tax. The amount claimed back has nothing to do with the insurer's tax liability. It is the relief that the subscriber has withheld on his premium that matters. I hope that that answers the right hon. Gentleman's question.

Mr. Denzil Davies: On the point about the EC directive, does the Prime Minister know about that? And did I hear the Minister say that an EEC insurance company that was not trading in Britain cannot claim back from the United Kingdom Inland Revenue the tax that has been deducted in paying the premium? Is that what the right hon. Gentleman said?

Mr. Lamont: I said that relief would have to operate in a different way. The company would not be able to get relief at source, which is a different matter—

Mr. Davies: Will the European insurance company get the tax back? 1 am not concerned how it happens, but does the relief go to the insurance company in the end?

Mr. Lamont: The answer is no.
My hon. Friend the Member for Eastbourne asked another question about non-taxpayers claiming relief. There seems to have been a degree of confusion about the matter. Non-taxpayers can benefit from what is proposed; the insurer can claim the amount even though the individual is not a taxpayer. That is not a new principle. It is precisely what happens with mortgage interest relief—with MIRAS. The fact that relief is available for non-taxpayers is one answer to those who say that the scheme is only for the rich and that it benefits only the better off. I emphasise that, in operating a MIRAS-type scheme for health insurance, the Inland Revenue auditors will be checking the insurers' books to ensure that the scheme is being operated wholly properly, just as they do with MIRAS.

Mr. Win Griffiths: Is the Minister aware that an EEC directive that is currently being discussed would allow small companies not to be subject to compulsory audit? I know that the Government are against that aspect of the directive, but if it were introduced surely what the Minister has just said would no longer be true.

Mr. Lamont: An Inland Revenue audit has nothing to do with a statutory audit for Companies Act purposes, so the hon. Gentleman is slightly off beam, I am afraid.
The hon. Member for Berwick-upon-Tweed (Mr. Beith) asked whether the non-taxpayer would still have to fill in a form. The answer is yes. He would still be allowed to benefit from the tax relief, even as a non-taxpayer. I stress the role of the Revenue in looking at companies' books.
The right hon. Member for Llanelli suggested that people might take out insurance shortly before they went

into hospital as a means of obtaining tax relief, rather like the man who takes out fire insurance just as his house begins to catch fire. In the first place, I think that it would be difficult to persuade the insurance company to give the relief, and in any case it would certainly not be approved by the Revenue.
Opposition Members asked about the deadweight cost. There are about 300,000 medical insurance policyholders aged over 60 at present. The cost of £40 million in 1990–91 is based on the assumption that there will be a further 10 per cent. take-up in that year on top of the growth that we would otherwise have expected. My hon. Friend the Member for Beaconsfield (Mr. Smith) stressed the deadweight and how little additionality had been provided for. We strongly hope that people will take advantage of the relief and, although we are making only a modest assumption in the first year, hon. Members should remember that it is only a first-year cost.
While emphasising the deadweight, Opposition Members have said, slightly inconsistently, that the cost of the measure could be very high, depending on the take-up. They advanced some alarmist arithmetic to suggest that if there were a 100 per cent. increase in the number of pensioners with provision for private health insurance, the cost might be hundreds of millions of pounds Even a 100 per cent. increase in take-up would increase the cost only to £70 million. Opposition Members have made that mistake because they greatly overestimate the cost of a typical health insurance policy taken out by elderly people.
The hon. Member for Newcastle upon Tyne, East paraded some figures. He must have carried out much research to find the most expensive policy available, because the real facts are different. A policy of the sort most commonly marketed to the over-60s currently costs about £450 a year for a couple aged up to 69, rising to about £600 at age 70. The cost of tax relief will on average be less than £100 per head.
Equally, the hon. Member for Bridgend (Mr. Griffiths) talked about PPP insurance cover for someone aged 65 to 74 costing £670 in tax relief. I have the PPP leaflet here and the annual premium for its retirement health plan for people aged 70 to 74 is just over £300, on which tax relief at 25 per cent. would be £75. The cover for someone aged 65 to 69 would cost even less.

Mr. Win Griffiths: From memory, the figure that I quoted was for a couple, one of whom was over 70. It was not for one individual.

Mr. Lamont: I have put the facts as they appear in the leaflet.

Mr. Battle: Many people take out minimum limited cover.

Mr. Lamont: Of course, as the hon. Gentleman just shouted out, many elderly people take out limited cover and the cost of that is much less, and so, too, is the tax relief. I do not see anything about which to apologise.
A number of my hon. Friends, especially my hon. Friends the Members for Beaconsfield and Horsham (Sir P. Horden), made it clear that they had a number of reservations about the clause. My hon. Friends the Members for Horsham and for Beaconsfield made it clear that their objections are very different from those put forward by the Opposition. My hon. Friends made it clear that their main objections were on grounds of tax policy.


They believed that there should be fewer reliefs but lower rates. We have, of course, always made it clear that it would always be difficult, and probably not possible, to reach an entirely neutral tax system. As my hon. Friends know, we have certainly abolished some tax reliefs, but we have created others where we have thought they were socially or economically desirable. My hon. Friend the Member for Beaconsfield said that he thought that tax relief for saving or enterprise would be his choice, but why not also tax relief for helping the elderly or for relieving pressure on the National Health Service?
My hon. Friend the Member for Beaconsfield suggested that, perhaps, we should have a cap on the relief, which was a point made by a number of Opposition Members. An analogy was drawn with relief only being allowed on the first £30,000 of a mortgage. However, there are limits on the amount of money that one can spend on medical insurance. What one is allowed to spend it on will be limited and defined in the regulations that will be specified under the Bill. We believe that the average cost will be about £100.
The hon. Member for Newcastle upon Tyne, East referred to comments made by my right hon. Friend the Chief Secretary and my written answer. I assure the hon. Gentleman that there is no inconsistency between myself and my right hon. Friend. My right hon. Friend was right when he said that up to 80 per cent. of those covered will be basic rate taxpayers or not liable to tax. Opposition Members have not realised the difference between those paying the premiums and those covered by the premiums. My right hon. Friend's assertion is in no way inconsistent with my parliamentary answer, when I said that we expect that slightly more than half of the cost of tax relief will go to basic rate or non-taxpayers and half to higher rate taxpayers.
The hon. Member for Holborn and St. Pancras (Mr. Dobson) referred to schemes which provided private sector treatment only if treatment was not available within the NHS within a few weeks. He asked how the schemes would relieve pressure on the National Health Service. I advise him that such schemes offer genuine medical insurance and, although they give a limited form of cover and a limited availability of private medical treatment, the premiums are lower and, to a limited extent, they still relieve the pressure on the National Health Service. Therefore, they qualify for the relief.
The hon. Member for Holborn and St. Pancras referred to the schemes that are offering cash benefits. We do not see why schemes that offer cash benefits should qualify for insurance because the whole purpose of the provision is to relieve the pressure on the National Health Service, not to give cash benefits unrelated to medical care. However, as my hon. Friend the Member for Beaconsfield picked up, we have allowed a de minimis amount of £5 per day, but I emphasise that that £5 per day is in addition to medical cover being provided. It is supplementary to that. There is no question of people getting tax relief for cash allowances without having private medical treatment.

Mr. Nicholas Brown: I understand what the right hon. Gentleman means about de minimis and, although £5 per day tax free may be de minimis to him, it is quite a lot of

money to many old-age pensioners. I am not sure that that exclusion in the regulations is not intended to help sell the schemes.

Mr. Lamont: I very much doubt that because many of the cash amounts that are provided through schemes are substantially higher than that amount. In terms of the tax relief, the cost of £5 for the relatively short period of most illnesses is absolutely minuscule and does not add to the cost of the scheme.
We believe that the scheme is justified. It is targeted and limited. It is aimed specifically at elderly people—at the over-60s. We have explained that we believe that many people who may have had company schemes and who may have contributed to private health insurance during their working lives find difficulty in maintaining such payments in retirement and that it is right to help them in that situation.
Opposition Members have said that the money would be better spent on the National Health Service, but it is not an alternative. We are talking about an additional modest sum of £40 million, which is 0.15 per cent. of the total spending on the National Health Service and 1.6 per cent. of the increase in 1989–90. As my hon. Friends know, we are increasing spending by £2.5 billion this year and by £2.5 billion next year. That is a total increase of £5 billion in our spending on the National Health Service. A small, modest tax relief amounting to £40 million will help the Health Service in a different way by relieving the pressure on it.
Opposition Members have also said that the provisions will undermine the National Health Service. I do not believe that for one minute. The fact that we have committed such huge resources to the National Health Service is evidence of that. The proportion of GDP spent on the National Health Service is higher today under this Government than it was under the Labour Government. That demonstrates that we have no intention of undermining the National Health Service. I repeat that the provision is designed to relieve pressure on the National Health Service. The hon. Member for Clydebank and Milngavie (Mr. Worthington) wondered how, but, by definition, a person using the private sector is not using the National Health Service.
It is a fallacy to believe that medical resources are somehow fixed and limited and that they cannot be increased in response to extra demand. My hon. Friend the Member for Beaconsfield said that he did not doubt that and that he was satisfied that there would be some relief of the National Health Service but that he wondered why we had to have tax help as well. We believe that, over time, it will be a good bargain. The cost of the tax relief will be only £100 per person and the cost of the National Health Service per person over 60 is £850 for hospital treatment and £1,000 for the National Health Service provisions as a whole. Therefore, over time the tax relief will be cost-effective, notwithstanding the inevitable deadweight in the initial stages.
We do not see the growth of the private sector as a threat to the National Health Service. As my hon. Friend the Member for Eastbourne said, we want a partnership between the Health Service and the private sector. As he said, it is part of the philosophy of the White Paper that the two should grow together. The growth of the private sector is not a bad thing.
Tax relief will generate additional resources. In an excellent speech, my hon. Friend the Member for Stamford and Spalding said that someone will obtain the tax relief only if the resources are provided for private health out of his own pocket. The total resources made available are not just the cost of the tax relief but of the person's expenditure on top of the tax relief. For a 40 per cent. taxpayer that means that the tax subsidy will be multiplied two and a half times. That is how extra resources will be brought into the Health Service as a result of this relief. That is how pressure on the National Health Service will be relieved.
I do not believe, as Opposition Members seem to do, that resources are finite, or fixed and cannot be increased. This relief will help health services both public and private. Therefore, it is in the interests of everyone in the country and I urge my right hon. and hon. Friends to reject the amendment.

Amendment negatived.

Question put, That the clause stand part of the Bill:—

The Committee divided: Ayes 238, Noes 183.

Division No. 191]
110.00 pm


AYES


Aitken, Jonathan
Cran, James


Alexander, Richard
Currie, Mrs Edwina


Alison, Rt Hon Michael
Curry, David


Allason, Rupert
Davies, Q. (Stamf'd &amp; Spald'g)


Amess, David
Davis, David (Boothferry)


Amos, Alan
Day, Stephen


Arbuthnot, James
Devlin, Tim


Arnold, Tom (Hazel Grove)
Dorrell, Stephen


Ashby, David
Douglas-Hamilton, Lord James


Atkins, Robert
Dunn, Bob


Baldry, Tony
Durant, Tony


Banks, Robert (Harrogate)
Eggar, Tim


Batiste, Spencer
Evans, David (Welwyn Hatf'd)


Beaumont-Dark, Anthony
Evennett, David


Bellingham, Henry
Fallon, Michael


Bendall, Vivian
Favell, Tony


Bennett, Nicholas (Pembroke)
Field, Barry (Isle of Wight)


Blackburn, Dr John G.
Fishburn, John Dudley


Blaker, Rt Hon Sir Peter
Fookes, Dame Janet


Body, Sir Richard
Forman, Nigel


Boscawen, Hon Robert
Forsyth, Michael (Stirling)


Boswell, Tim
Forth, Eric


Bottomley, Peter
Fox, Sir Marcus


Bottomley, Mrs Virginia
Franks, Cecil


Bowis, John
Freeman, Roger


Boyson, Rt Hon Dr Sir Rhodes
French, Douglas


Braine, Rt Hon Sir Bernard
Gardiner, George


Brandon-Bravo, Martin
Garel-Jones, Tristan


Brazier, Julian
Gill, Christopher


Bright, Graham
Glyn, Dr Alan


Brooke, Rt Hon Peter
Goodhart, Sir Philip


Brown, Michael (Brigg &amp; Cl't's)
Goodlad, Alastair


Bruce, Ian (Dorset South)
Goodson-Wickes, Dr Charles


Buchanan-Smith, Rt Hon Alick
Gow, Ian


Buck, Sir Antony
Grant, Sir Anthony (CambsSW)


Budgen, Nicholas
Greenway, Harry (Ealing N)


Burns, Simon
Greenway, John (Ryedale)


Burt, Alistair
Gregory, Conal


Butler, Chris
Griffiths, Peter (Portsmouth N)


Butterfill, John
Grist, Ian


Carlisle, Kenneth (Lincoln)
Grylls, Michael


Carrington, Matthew
Gummer, Rt Hon John Selwyn


Chalker, Rt Hon Mrs Lynda
Hague, William


Chope, Christopher
Hamilton, Hon Archie (Epsom)


Churchill, Mr
Hamilton, Neil (Tatton)


Clark, Dr Michael (Rochford)
Hanley, Jeremy


Clark, Sir W. (Croydon S)
Hannam, John


Colvin, Michael
Hargreaves, A. (B'ham H'll Gr')


Coombs, Anthony (Wyre F'rest)
Harris, David


Cope, Rt Hon John
Haselhurst, Alan


Couchman, James
Hawkins, Christopher





Hayes, Jerry
Newton, Rt Hon Tony


Hayward, Robert
Nicholls, Patrick


Heathcoat-Amory, David
Nicholson, David (Taunton)


Heddle, John
Nicholson, Emma (Devon West)


Heseltine, Rt Hon Michael
Onslow, Rt Hon Cranley


Hicks, Mrs Maureen (Wolv' NE)
Oppenheim, Phillip


Hicks, Robert (Cornwall SE)
Page, Richard


Higgins, Rt Hon Terence L.
Paice, James


Hind, Kenneth
Parkinson, Rt Hon Cecil


Hogg, Hon Douglas (Gr'th'm)
Patnick, Irvine


Howarth, G. (Cannock &amp; B'wd)
Patten, Chris (Bath)


Howell, Rt Hon David (G'dford)
Patten, John (Oxford W)


Hunt, David (Wirral W)
Pattie, Rt Hon Sir Geoffrey


Hunter, Andrew
Pawsey, James


Irvine, Michael
Porter, David (Waveney)


Irving, Charles
Price, Sir David


Jack, Michael
Raffan, Keith


Jackson, Robert
Redwood, John


Janman, Tim
Renton, Tim


Jones, Gwilym (Cardiff N)
Rhodes James, Robert


Jones, Robert B (Herts W)
Riddick, Graham


Kellett-Bowman, Dame Elaine
Rowe, Andrew


Key, Robert
Sayeed, Jonathan


Kilfedder, James
Shaw, Sir Giles (Pudsey)


King, Roger (B'ham N'thfield)
Shepherd, Colin (Hereford)


Kirkhope, Timothy
Shersby, Michael


Knapman, Roger
Skeet, Sir Trevor


Knowles, Michael
Speller, Tony


Knox, David
Spicer, Sir Jim (Dorset W)


Lamont, Rt Hon Norman
Squire, Robin


Lang, Ian
Stern, Michael


Latham, Michael
Stewart, Andy (Sherwood)


Lawrence, Ivan
Stradling Thomas, Sir John


Lennox-Boyd, Hon Mark
Sumberg, David


Lester, Jim (Broxtowe)
Taylor, Ian (Esher)


Lightbown, David
Taylor, John M (Solihull)


Lilley, Peter
Taylor, Teddy (S'end E)


Lloyd, Sir Ian (Havant)
Tebbit, Rt Hon Norman


Lloyd, Peter (Fareham)
Temple-Morris, Peter


Macfarlane, Sir Neil
Thompson, D. (Calder Valley)


MacGregor, Rt Hon John
Thompson, Patrick (Norwich N)


Maclean, David
Thorne, Neil


McLoughlin, Patrick
Thurnham, Peter


McNair-Wilson, Sir Michael
Tracey, Richard


McNair-Wilson, P. (New Forest)
Tredinnick, David


Madel, David
Trippier, David


Major, Rt Hon John
Trotter, Neville


Malins, Humfrey
Twinn, Dr Ian


Mans, Keith
Waddington, Rt Hon David


Maples, John
Wakeham, Rt Hon John


Marland, Paul
Walden, George


Marshall, John (Hendon S)
Walker, Bill (T'side North)


Marshall, Michael (Arundel)
Waller, Gary


Martin, David (Portsmouth S)
Ward, John


Mates, Michael
Wardle, Charles (Bexhill)


Maude, Hon Francis
Wells, Bowen


Mayhew, Rt Hon Sir Patrick
Wheeler, John


Miller, Sir Hal
Widdecombe, Ann


Mills, Iain
Wiggin, Jerry


Mitchell, Andrew (Gedling)
Winterton, Mrs Ann


Mitchell, Sir David
Wolfson, Mark


Moate, Roger
Wood, Timothy


Monro, Sir Hector
Woodcock, Mike


Montgomery, Sir Fergus
Yeo, Tim


Morris, M (N'hampton S)
Young, Sir George (Acton)


Morrison, Sir Charles
Younger, Rt Hon George


Moss, Malcolm 



Neale, Gerrard
Tellers for the Ayes:


Nelson, Anthony
Mr. Alan Howarth and


Neubert, Michael
Mr. Sydney Chapman.


NOES


Abbott, Ms Diane
Beckett, Margaret


Allen, Graham
Beith, A. J.


Anderson, Donald
Bell, Stuart


Archer, Rt Hon Peter
Benn, Rt Hon Tony


Armstrong, Hilary
Bermingham, Gerald


Banks, Tony (Newham NW)
Blair, Tony


Barron, Kevin
Blunkett, David


Battle, John
Boyes, Roland






Bray, Dr Jeremy
Lestor, Joan (Eccles)


Brown, Gordon (D'mline E)
Lewis, Terry


Brown, Nicholas (Newcastle E)
Livsey, Richard


Buckley, George J.
Lloyd, Tony (Stretford)


Caborn, Richard
Lofthouse, Geoffrey


Campbell, Menzies (Fife NE)
Loyden, Eddie


Campbell, Ron (Blyth Valley)
McAllion, John


Campbell-Savours, D. N.
McAvoy, Thomas


Carlile, Alex (Mont'g)
McFall, John


Clark, Dr David (S Shields)
McGrady, Eddie


Clarke, Tom (Monklands W)
McKay, Allen (Barnsley West)


Clay, Bob
McKelvey, William


Clelland, David
McLeish, Henry


Clwyd, Mrs Ann
McNamara, Kevin


Cohen, Harry
Madden, Max


Cook, Frank (Stockton N)
Mahon, Mrs Alice


Cook, Robin (Livingston)
Marek, Dr John


Corbett, Robin
Marshall, Jim (Leicester S)


Corbyn, Jeremy
Martin, Michael J. (Springburn)


Cousins, Jim
Martlew, Eric


Cox, Tom
Meacher, Michael


Cryer, Bob
Meale, Alan


Cummings, John
Michael, Alun


Cunliffe, Lawrence
Michie, Bill (Sheffield Heeley)


Cunningham, Dr John
Michie, Mrs Ray (Arg'l &amp; Bute)


Darling, Alistair
Mitchell, Austin (G't Grimsby)


Davies, Rt Hon Denzil (Llanelli)
Moonie, Dr Lewis


Davies, Ron (Caerphilly)
Morgan, Rhodri


Davis, Terry (B'ham Hodge H'l)
Morley, Elliott 


Dixon, Don
Morris, Rt Hon A. (W'shawe)


Dobson, Frank
Morris, Rt Hon J. (Aberavon)


Doran, Frank
Mullin, Chris


Douglas, Dick
Murphy, Paul


Dunnachie, Jimmy
Nellist, Dave


Eadie, Alexander
Oakes, Rt Hon Gordon


Evans, John (St Helens N)
O'Brien, William


Ewing, Mrs Margaret (Moray)
O'Neill, Martin


Fearn, Ronald
Orme, Rt Hon Stanley


Field, Frank (Birkenhead)
Patchett, Terry


Fisher, Mark
Pendry, Tom


Flannery, Martin
Pike, Peter L.


Flynn, Paul
Powell, Ray (Ogmore)


Foot, Rt Hon Michael
Prescott, John


Foster, Derek
Primarolo, Dawn


Foulkes, George
Quin, Ms Joyce


Fyfe, Maria
Radice, Giles


Garrett, John (Norwich South)
Randall, Stuart


Godman, Dr Norman A.
Redmond, Martin


Golding, Mrs Llin
Rees, Rt Hon Merlyn


Gordon, Mildred
Reid, Dr John


Gould, Bryan
Richardson, Jo


Graham, Thomas
Robertson, George


Grant, Bernie (Tottenham)
Rooker, Jeff


Griffiths, Win (Bridgend)
Ross, Ernie (Dundee W)


Grocott, Bruce
Rowlands, Ted


Harman, Ms Harriet
Ruddock, Joan


Haynes, Frank
Salmond, Alex


Healey, Rt Hon Denis
Sedgemore, Brian


Henderson, Doug
Sheerman, Barry


Home Robertson, John
Shore, Rt Hon Peter


Hood, Jimmy
Short, Clare


Howarth, George (Knowsley N)
Skinner, Dennis


Howell, Rt Hon D. (S'heath)
Smith, Andrew (Oxford E)


Howells, Dr. Kim (Pontypridd)
Smith, C. (Isl'ton &amp; F'bury)


Hughes, John (Coventry NE)
Smith, Rt Hon J. (Monk'ds E)


Hughes, Robert (Aberdeen N)
Smith, John P.


Hughes, Roy (Newport E)
Snape, Peter


Hughes, Sean (Knowsley S)
Soley, Clive


Hughes, Simon (Southwark)
Steinberg, Gerry


Illsley, Eric
Strang, Gavin


Ingram, Adam
Straw, Jack


Jones, Barry (Alyn &amp; Deeside)
Taylor, Mrs Ann (Dewsbury)


Jones, leuan (Ynys Môn)
Taylor, Matthew (Truro)


Jones, Martyn (Clwyd S W)
Turner, Dennis


Kennedy, Charles
Vaz, Keith


Kinnock, Rt Hon Neil
Wall, Pat


Kirkwood, Archy
Wallace, James


Lamond, James
Walley, Joan


Leadbitter, Ted
Wardell, Gareth (Gower)


Leighton, Ron
Welsh, Andrew (Angus E)





Williams, Rt Hon Alan
Wray, Jimmy


Williams, Alan W. (Carm'then)



Wilson, Brian
Tellers for the Noes:


Winnick, David
Mr. Ken Eastham and


Worthington, Tony
Mr. Robert N. Wareing.

Clause 51 ordered to stand part of the Bill.

Mr. Madden: On a point of order, Sir Paul. On 5 May the Minister for Local Government wrote to me and to all other hon. Members, presumably yourself included, saying that he was aware how important it was to make sure that people knew about the community charge—

The First Deputy Chairman of Ways and Means (Sir Paul Dean): Order. I must stop the hon. Gentleman. We are in Committee on the Finance Bill. I doubt whether the hon. Gentleman is raising a point of order, but even if he is I cannot take it in Committee; I can take it only when we are sitting as a House.

Mr. Madden: I understand that, Sir Paul. Before you took the Chair this matter was raised under points of order. As the Leader of the House is in his place, I wish to ask when the Government will make a statement advising us what action is being taken to stop these leaflets being put through the letter boxes—

The First Deputy Chairman: Order. That is not a matter for the Committee of the whole House. The hon. Gentleman must seek some other way to raise the matter that concerns him.

Mr. Madden: rose—

The First Deputy Chairman: Order. We are in Committee of the whole House and I hope that I have made it clear to the Committee that I cannot deal with such a matter now. I doubt very much whether it is a matter for the Chair anyway, but it is certainly not matter for me as Chairman of the Committee of the whole House.

Mr. Bob Cryer: On a point of order, Sir Paul. In view of the circumstances in which the Government have been spending money, would it be possible for you to allow a manuscript amendment to the Bill at this stage in order to remove the Government's authority to spend money on these deceitful leaflets? The Minister has been running rampant doing this—

The First Deputy Chairman: Order. The hon. Gentleman is very ingenious but in no way could that be made in order on the clauses we are now discussing. We now come to—

Mr. Madden: rose—

The First Deputy Chairman: Order. I have tried to make it clear twice to the hon. Gentleman that I cannot conceivably take a point of order on the community charge while we are in Committee of the whole House considering the Finance Bill. I must reiterate that the hon. Gentleman must find another way to raise the matter which concerns him. I cannot take it now.

Mr. Madden: rose—

Mr. Dennis Skinner: rose—

The First Deputy Chairman: Order. I am on my feet. We are in Committee on the Finance Bill. The points of order


which have been raised are not matters for the Chair and are certainly not in order on the proceedings of the Finance Bill, with which we must now get on. Mr. Alan Beith.

Mr. Skinner: On a point of order, Sir Paul. You are absolutely right on this matter because it is difficult chairing meetings for a long time. However, I wonder whether you would be prepared to accept a manuscript amendment in the guise of a new clause to the Finance Bill in order to provide surcharges on those Ministers who have been spending taxpayers' money on these leaflets, just as you would if this were a local authority? Will you accept a manuscript amendment?

The First Deputy Chairman: I regret to say that I cannot do that. We must deal with the amendments on the Amendment Paper and we must be fair to those hon. Members who have amendments in their names. Mr. Alan Beith.

Clause 33

CORPORATION TAX: SMALL COMPANIES

Mr. Beith: I beg to move amendment No. 14, in page 23, line 5, leave out '£150,000' and insert '£250,000'.
This concerns a form of relief to small businesses and I am bound to say that it is a much better way of spending taxpayers' money than on tendentious leaflets about the community charge, which I have received since my copy has already come through the door. Moreover, I think that those for whom this amendment is designed as a benefit, small companies, which contribute so largely to the public revenues, will feel very strongly that the funds they contribute through taxation should not be used for propaganda in pursuit of Government policies.
I am sure that in considering my amendment the Minister will feel even more impelled to accept the greater relief I am suggesting, covered as he is with guilt through the activities of the Government in publishing at taxpayers' expense leaflets about the community charge.

Mr. Madden: Does the hon. Gentleman, think, like me, that it is very important that this Committee, as it is concerned with small businesses and the business rate system, should be told what action the Government will take to recover the leaflets which have been put through the letter boxes of many of our constituents?

The First Deputy Chairman: Order. I am sure that the hon. Gentleman will not spoil his amendment by getting out of order.

Mr. Beith: I will certainly do my best to keep within order, Sir Paul, and to avoid your chastening.
It is the sense of many small businesses that this Budget is certainly one of some disappointment. There are many specific measures that small businesses would have liked to see in the Budget in a number of areas. The area in which the Government have taken some action on the lines which we proposed is one on which I will argue that they ought to have gone considerably further.
In our Budget proposals before Budget day we put forward the view that the threshold below which small businesses pay the lower level of corporation tax should be raised to £250,000. The Government agreed to a much smaller increase to a threshold of £150,000 based on a rate

fixed in 1982, so it has remained at that level for a long time. There is an argument for making the relief more extensive. However, while the amendment would benefit many small manufacturing firms, it does not cover the whole range of small business including sole traders and very small firms, whose activities fall far below the scope even of the relief I propose.
The Government recognise that the present rate of corporation tax for small businesses is one on which relief could reasonably be raised. The Government get a great deal of money out of corporation tax. It is one of the most buoyant elements of revenue, and the Government continue quietly collecting that money without much public recognition of the contribution that business makes. The Chancellor is happy to talk about his Budget surplus and what he plans doing with it, but he does not seem so keen to explain how much of that surplus comes from asset sales and how much from corporation tax.
One paradox is that corporation tax rates in this country are lower than in competitor countries, but that British companies pay more corporation tax than their European competitors. One can speculate as to why that is so. It could be because of greater compliance, more stringent enforcement, or different systems of relief. The fact remains that British businesses pay heavier amounts of corporation tax than do their Community competitors.
One business sector particularly in need of relief is smaller manufacturing companies. Many of them are bearing the heaviest burden of the present high interest and high exchange rates. Some of the largest companies have considerable cash mountains at their disposal and are not the victims of high interest rates. Many gain substantially from them. All those involved in exports are affected by exchange rates, but the combined effect of high interest and high exchange rates bears most heavily on smaller firms. Companies that should now be preparing for 1992 face increasing costs, such as those involved in third party verification of products standards. Nevertheless, they feel a compelling need to improve their export performance. The Chancellor's whole Budget strategy is based on the assumption that there will be a massive improvement in our country's export performance. The major contributors to any such improvement must be smaller manufacturing companies, for whom I argue that a greater level of relief should be provided.
The Government's main argument against reducing corporation tax is that that might add to wage inflation by reducing pressure on employers to control their labour costs. That contention cannot apply to smaller companies, which are not the culprits in fuelling wage inflation. They are not usually the leaders in the pay round, and often are among those that have worked hardest to trim their costs so that they can stay in business.
The threshold at which those smaller companies become eligible for the higher rate of corporation tax should be raised not just to £150,000 but to £250,000. A related amendment increases the other end of the scale from £750,000 to £1 million, so that it will remain smooth between those two points. That is one way that the Budget can be made more helpful to small firms, and one that Conservative Members should find to their liking. I hope that some hon. and right hon. Members who have stayed on to listen to this short debate will join us in the Lobby tonight and support a higher level of relief for smaller businesses than is proposed in the Budget. I invite them to do so.

The Paymaster General (Mr. Peter Brooke): The hon. Member for Berwick-upon-Tweed (Mr. Beith) moved his amendment concisely and briskly. He paid tribute to the interest his party has in small businesses and in that he is echoing the interest that the Government have. My hon. Friend the Member for Taunton (Mr. Nicholson) put a shrewd question to my right hon. Friend the Chancellor of the Exchequer on 27 April about tax concessions, which was specifically directed to small businesses since 1979, which was answered by my right hon. Friend the Financial Secretary. It ran to two and a half columns in the Official Report. I have no doubt at all that small business men in Somerset, who read eagerly the questions put down by my hon. Friend the Member for Taunton, responded enthusiastically to that information and that that was in part responsible for Somerset being wrested from the hon. Member's party during the recent county council elections.
The hon. Member asked why, with lower rates of corporation tax, we achieved higher yields, and suggested it was either compliance or the quality of the surveillance by the Inland Revenue. The answer of course is the extremely successful and high rates of profitability being earned by British companies during the economic expansion we have enjoyed for the last seven or eight years. He made reference to interest rates, but small companies in particular wish to see a reduction in inflation, to which those interest rates are directed.
As to the merits of the hon. Member's amendment, the background to the lower rate of corporation tax, the small companies' rate, is familiar to the Committee. Clause 33 increases the profit limits for the small companies rate and the associated marginal relief to £150,000 and £750,000 respectively, as the hon. Member said. The Government's changes in recent years have concentrated on bringing the rate of corporation tax down, so increasing the profit limits has not been a high priority and the limits have remained unchanged since 1983. This year we thought it right to increase the limits substantially.
The two amendments which the hon. Member has tabled would increase the profit limits even further. In our view, those limits would be too high. Clause 33 already increases both limits by 50 per cent., which is more than enough to take account of inflation over the period since the limits were last raised. Over 20,000 companies will pay less tax as a result of this change. This represents half of those companies which were previously paying corporation tax at a higher rate than the small companies' rate. We think the new limits we have proposed are high enough.
There is another objection to adopting the limits the amendments propose. Under our present proposal the special rate of corporation tax which applies to company profits between £150,000 and £750,000 will remain at 37½ per cent., because we are increasing both limits by the same proportion. If the limits were raised, as the hon. Member's amendments propose, to £250,000 and £1 million, the marginal rate would have to be 381/3 per cent. I know that some companies are convinced about the disincentive effect of high marginal rates, and we would be very reluctant to increase the marginal rate even by a small amount.
Finally, I have seen the hon. Member's press release which accompanied this amendment. We are looking

forward very much to the hon. Member being on the Committee upstairs, but I hope that he will be able to manage something more substantial in his next press release than he has done tonight.

Mr. Nicholas Brown: The Minister is quite right to raise the attendance of the hon. Member for Berwick-upon-Tweed (Mr. Beith) at the Finance Committee. The Minister will remember that the hon. Gentleman was a member of the Finance Bill Committee last year and attended only three of the 15 sittings. In fact, his absence from that Committee stage was commented on almost every day of the proceedings.

Mr. Brooke: The hon. Member for Newcastle upon Tyne, East (Mr. Brown) is quite right in his recollection of those events. There passed through my mind as I surveyed the empty seat of the hon. Member last year that remark of Sir Winston Churchill concerning the Margrave of Baden, who was one of the allies of the first Duke, of whom it was said that his military epitaph for all time should be that the two greatest captains of his age thought his absence from the field as an ally well worth 15,000 men.
I urge my hon. and right hon. Friends to resist this amendment.

Mr. Beith: The hon. Member for Newcastle upon Tyne, East (Mr. Brown) and the Paymaster General must be the only two Members in the Committee who did not notice where I went in July last year or how I occupied my time during that month. I am glad to say that my hon. Friend the Member for Orkney and Shetland (Mr. Wallace) discharged an excellent service in that Committee's far smaller number of sittings, during which I fought a certain election.
If that is the only reason that the Government can think of for not allowing a higher level of relief for small business, and the only reason that the Labour party can think of for not supporting it—[HON. MEMBERS: "What about the policy review?"] Indeed, perhaps the matter could be brought into the Labour party's policy review. The dearth of serious argument, however, leads me to believe that my hon. Friends should be given the opportunity to invite those who genuinely support small business to come into the Lobby and vote for the amendment.

Question put, That the amendment be made:—

The Committee divided: Ayes 14, Noes 179.

Division No. 192]
[10.35 pm


AYES


Beith, A. J.
Livsey, Richard


Campbell, Menzies (Fife NE)
McGrady, Eddie


Carlile, Alex (Mont'g)
Michie, Mrs Ray (Arg'l &amp; Bute)


Ewing, Mrs Margaret (Moray)
Salmond, Alex


Fearn, Ronald
Welsh, Andrew (Angus E)


Hughes, Simon (Southwark)



Jones, leuan (Ynys Mön)
Tellers for the Ayes:


Kennedy, Charles
Mr. James Wallace and


Kirkwood Archy
Mr. Matthew Taylor.


NOES


Aitken, Jonathan
Bellingham, Henry


Alexander, Richard
Bennett, Nicholas (Pembroke)


Alison, Rt Hon Michael
Blackburn, Dr John G.


Amess, David
Blaker, Rt Hon Sir Peter


Amos, Alan
Boscawen, Hon Robert


Arbuthnot, James
Boswell, Tim


Arnold, Tom (Hazel Grove)
Bottomley, Peter


Batiste, Spencer
Bottomley, Mrs Virginia


Beaumont-Dark, Anthony
Bowis, John






Braine, Rt Hon Sir Bernard
Garel-Jones, Tristan


Brandon-Bravo, Martin
Gill, Christopher


Brazier, Julian
Glyn, Dr Alan


Bright, Graham
Goodson-Wickes, Dr Charles


Brooke, Rt Hon Peter
Gow, Ian


Brown, Michael (Brigg &amp; Cl't's)
Greenway, John (Ryedale)


Buck, Sir Antony
Gregory, Conal


Burns, Simon
Griffiths, Peter (Portsmouth N)


Burt, Alistair
Grist, Ian


Butler, Chris
Gummer, Rt Hon John Selwyn


Butterfill, John
Hague, William


Carlisle, Kenneth (Lincoln)
Hamilton, Hon Archie (Epsom)


Carrington, Matthew
Hamilton, Neil (Tatton)


Chapman, Sydney
Hanley, Jeremy


Chope, Christopher
Hannam, John


Churchill, Mr
Hargreaves, A. (B'ham H'll Gr')


Clark, Sir W. (Croydon S)
Harris, David


Colvin, Michael
Hawkins, Christopher


Conway, Derek
Hayward, Robert


Coombs, Anthony (Wyre F'rest)
Heddle, John


Cope, Rt Hon John
Hicks, Mrs Maureen (Wolv' NE)


Couchman, James
Hicks, Robert (Cornwall SE)


Cran, James
Hind, Kenneth


Currie, Mrs Edwina
Hogg, Hon Douglas (Gr'th'm)


Curry, David
Howarth, Alan (Strat'd-on-A)


Davies, Q. (Stamf'd &amp; Spald'g)
Howarth, G. (Cannock &amp; B'wd)


Davis, David (Boothferry)
Howell, Rt Hon David (G'dford)


Day, Stephen
Hunt, David (Wirral W)


Dorrell, Stephen
Hunter, Andrew


Douglas-Hamilton, Lord James
Irvine, Michael


Dunn, Bob
Jack, Michael


Durant, Tony
Jackson, Robert


Evans, David (Welwyn Hatf'd)
Janman, Tim


Fallon, Michael
Jones, Gwilym (Cardiff N)


Favell, Tony
Jones, Robert B (Herts W)


Forman, Nigel
King, Roger (B'ham N'thfield)


Forsyth, Michael (Stirling)
Kirkhope, Timothy


Forth, Eric
Knapman, Roger


Fowler, Rt Hon Norman
Knowles, Michael


Franks, Cecil
Lamont, Rt Hon Norman


Freeman, Roger
Latham, Michael


French, Douglas
Lawrence, Ivan





Lennox-Boyd, Hon Mark
Raffan, Keith


Lester, Jim (Broxtowe)
Redwood, John


Lightbown, David
Rhodes James, Robert


Lilley, Peter
Riddick, Graham


Lloyd, Peter (Fareham)
Rowe, Andrew


Macfarlane, Sir Neil
Shaw, Sir Giles (Pudsey)


MacGregor, Rt Hon John
Shepherd, Colin (Hereford)


Maclean, David
Speller, Tony


McLoughlin, Patrick
Stern, Michael


Major, Rt Hon John
Stewart, Andy (Sherwood)


Mans, Keith
Stradling Thomas, Sir John


Marland, Paul
Sumberg, David


Marshall, John (Hendon S)
Taylor, Ian (Esher)


Martin, David (Portsmouth S)
Taylor, Teddy (S'end E)


Mates, Michael
Tebbit, Rt Hon Norman


Maude, Hon Francis
Temple-Morris, Peter


Mayhew, Rt Hon Sir Patrick
Thompson, D. (Calder Valley)


Miller, Sir Hal
Thompson, Patrick (Norwich N)


Mills, Iain
Thorne, Neil


Mitchell, Andrew (Gedling)
Thumham, Peter


Mitchell, Sir David
Tracey, Richard


Moate, Roger
Tredinnick, David


Monro, Sir Hector
Trotter, Neville


Morris, M (N'hampton S)
Twinn, Dr Ian


Morrison, Sir Charles
Waddington, Rt Hon David


Moss, Malcolm
Walden, George


Neale, Gerrard
Walker, Bill (T'side North)


Nelson, Anthony
Wardle, Charles (Bexhill)


Neubert, Michael
Watts, John


Nicholls, Patrick
Wells, Bowen


Nicholson, David (Taunton)
Wheeler, John


Nicholson, Emma (Devon West)
Widdecombe, Ann


Onslow, Rt Hon Cranley
Winterton, Mrs Ann


Oppenheim, Phillip
Wood, Timothy


Page, Richard
Yeo, Tim


Paice, James
Younger, Rt Hon George


Patnick, Irvine



Pattie, Rt Hon Sir Geoffrey
Tellers for the Noes:


Pawsey, James
Mr. John M. Taylor and


Porter, David (Waveney)
Mr. David Heathcoat-Amory.


Price, Sir David

Question accordingly negatived.

Question proposed, That the clause stand part of the Bill.

Mr. Nicholas Brown: There is less to clause 33 than meets the eye, and certainly less than the Government have claimed for it. Opposition Members are very understanding people, and we understand that it is a political necessity for the Conservative party to pretend to help small businesses. Of course it is necessary for the Minister and his colleagues to have something to tell their constituency parties. We are not unused to those circumstances. However, it is stretching the facts substantially further than is plausible to say, as the Chancellor of the Exchequer said in his Budget speech:
but I propose to increase the small companies' rate band substantially, by 50 per cent."—[Official Report, 14 March 1989; Vol. 149, c. 298.]
Perhaps uniquely on the Opposition Treasury team, I am a fan of the Chancellor's increasingly frequent forays into self-parody and I am sure that that was one example of it.
The truth is that the increase in the profit limit for the rate of small companies' corporation tax and the increase in the marginal relief threshold represent the first adjustment that the Government have made to those thresholds since 1982. It is in that context that the word "substantial" should be considered. If it is right to help small businesses in this way this year, one wonders why it was not right to do so last year, the year before that, and so on, back to 1982. The Government's arguments this year would have had similar force last year. If the measure is necessary to help small businesses, why was it not necessary last year? I ask the Paymaster General why this measure was not brought in last year, or the year before.
It may be helpful to the Committee if I spell out the minimum amount in profits prepaying the higher marginal tax rate that applied from 1974 onwards. The House will see that the amount rose steadily. In 1974 the figure was £25,000; in 1975, it was £30,000; in 1976, £40,000; in 1977, £50,000; in 1978, £60,000; in 1979, £70,000; in 1980, £80,000; in 1981, £90,000; and in 1982, it was £100,000. With equivalent rises in the maximum amount of profits prepaying the highest marginal tax rate, there the levels remained. The figure remained at £100,000 from 1982 until this year's Budget. If the Government claim to be helping small businesses, they need to explain why the figure was frozen for that period.

Mr. Beith: As the hon. Gentleman has criticised the Government for failing for so long to uprate the limit, will he explain why he did not feel able to invite his colleagues to join us in the Lobby in support of a higher threshold or to say during the debate why he was not going to do so?

Mr. Brown: I am addressing my remarks to the clause stand part debate.

Mr. Beith: Feeble.

Mr. Brown: If the hon. Gentleman breaks the habit of a lifetime and stays to listen to the debate, he will find out about the Labour party's position, and he will discover that we believe that rates are now about right.

Mr. James Wallace: How does the hon. Gentleman work that out?

Mr. Brown: I shall explain. It is worked out by taking the indexation that applied to the thresholds under the last

Labour Government and applying that forward. If that indexation, which we accepted as right, had been applied throughout the period of Conservative Government, the rates would have been £140,000 and £705,000, respectively. That is not so very different from the thresholds that the Government propose. The difference, of course, is that, under a Labour Government, small businesses would have had the advantage of a year-by-year increase.

Mr. Campbell-Savours: Is there not an additional factor? The Labour Government introduced the stock relief scheme against corporation tax, which had a marked effect on the corporation tax paid by companies.

Mr. Brown: That is correct as well. My contention is that many small businesses would have been advantaged by the regime that pertained when we were in power.

Mr. Wallace: The hon. Gentlemen has just agreed with his hon. Friend the Member for Workington (Mr. Campbell-Savours) that stock relief was an additional advantage. Now that it has gone, does he not think that the indexation that he has just used in a mechanistic and arithmetical way is an inadequate method of evaluating the benefit given? He should have been willing to support a figure higher than the one that he is ready to support.

Mr. Brown: It is self-evident that I do not think that; I have just said so. I think that the approach that I have outlined, which has belatedly been adopted by the Government, is the right one. As Treasury Ministers frequently tell us, and as I shall be telling people one day, I suppose, it is always difficult to strike a balance in these matters. It is not illogical to say that that is how we arrived at the figure.

Mr. Campbell-Savours: Is not the answer to the hon. Member for Orkney and Shetland (Mr. Wallace) that the stock relief scheme was brought in to deal with the inflation problems that followed the oil price increases in 1974, and that we are not dealing with the same conditions now?

Mr. Brown: My hon. Friend is absolutely right, although I was trying to refrain from discussing the oil crisis and the subsequent inflation, and to stick to the narrower topic of corporation tax relief.
The difference between the Labour party's position and that of the Government on this matter—

Mr. Wallace: Will the hon. Gentleman give way?

Mr. Brown: No, I shall not; the matter has already been given a good airing. No doubt the hon. Gentleman wishes to ask me to repeat what I said five minutes ago. That seems to have been the thrust of most of his interventions, and I will do that if he likes, but I would much rather explain the difference between the Labour party and the Government on this matter. The difference between us is that the Labour party believes that there should have been an annual uprating, whereas the Government chose to freeze the allowances for six years. The Government should address themselves to that, rather than to the more spurious points that the Liberal party is raising.
The Government certainly cannot describe today's increase as substantial. In any event, the savings to small businesses are not as great as the Government are trying to suggest, and in many cases they will certainly not be sufficient to make up for the far more damaging effects of


interest rate rises, which amount to 5·5 per cent. since May 1988. Rising interest rates, rather than the small business corporation tax rate, represent the most significant problem that small businesses face today.
In January this year the Small Business Research Trust stated that the biggest problem facing smaller firms is finance and interest rates. Interestingly enough, the second biggest problem facing small businesses was not corporation tax but skill shortages—again according to the Small Business Research Trust, although the trust did not go on to make the obvious point that skill shortages are caused by Government cuts in funds made available for education and training—indeed, by their failure even to admit that they should be addressing the problem.
At the same time, the National Federation of Self Employed and Small Businesses was drawing our attention to the increasing burdens that were being placed on small businesses by the necessity of having to go to law on issues such as bad debts—surely an unfair burden on businesses and an indication of the real health, or otherwise, of at least part of the economy.
Let me return to the major problem facing the small business community today—interest rates. All of us in the House would like to help our constituents who are running small businesses. Those whom I meet echo the comments of their local trade associations.
Most Members of Parliament will have heard small business men say they are working not for themselves, but for the bank. The banks, of course, make a considerable effort through their television advertising to present themselves as partners in enterprise, but most small businesses find that venture capital can be obtained only in exchange for a first charge on the small business man's family home. In those circumstances, the banks could scarcely claim that the risk has been evenly shared or even that the banks are taking any risk at all.
Government failure to develop an effective venture capital project, particularly for the regions—either through Government agencies or in partnership with private sector financial institutions—is a far greater restraint on the growth of small businesses than any change in corporation tax thresholds.

Mr. Ian Taylor: The hon. Gentleman has overlooked the fact that the venture capital industry has grown dramatically in recent years and that it is now dealing with a whole range of small companies and providing them with the much-needed equity capital that eases the interest rate problems that many of them face.

Mr. Brown: I am well aware of the activities of private sector venture capital banks and other financial institutions, but they operate very much at the margins. Many small businesses say that they cannot raise venture capital except at usurious rates of interest or by providing some form of security which leaves no risk for the venture capitalist, but leaves a great risk for the business man. In other words, it is an unacceptable risk for the business man. Small businesses need financial investing partners, which are not provided by private sector venture capital schemes. If the private sector takes high risks, it requires high rates of return on its money. It also wants whatever security it can get. It is not enough for the Government to leave it to the private sector. The Government have a duty,

either in partnership with the private sector or on their own, to make some sort of scheme available for the small business community.
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The charge that many small business men level against the banking community is that the banks will only lend money to those who are sufficiently wealthy not to need to borrow. In those circumstances, the recent interest rate rises prove to be an additional and in some cases an insuperable, rather than just a first hurdle for small businesses.
A survey of regional chambers of commerce highlights this point. The overseas trades committee of t he Nottinghamshire chamber of commerce concluded in January of this year that it was difficult to reconcile the interest of British exporters with increasing interest rates, and pointed out that foreign companies exist in a quite different regime of interest rates.
The Manchester chamber of commerce reported that 76 per cent. of its members had called for lower interest rates in its last survey. On Teesside the chamber of commerce felt that interest rate rises would make small businesses think twice about their investment decisions over the next six months. The secretary of the Glasgow chamber of commerce pointed out that high interest rates choke off marginal investment for small companies and that the service sector would be forced to load the additional cost on to clients, which could, in turn, mean that those clients would decide to make do with less services.
Those are the views—perfectly rational and understandable—of the authentic voice of the small business community. The Government's endeavours to help small businesses are more cosmetic than real. Their schemes are cheap rather than effective. The National Audit Office told us last autumn, when it looked at the enterprise allowance scheme and the loan guarantee scheme, that 43 per cent. of the enterprise allowance scheme's small businesses failed completely after three years. It found, too, that 42 per cent. of the loans extended under the loan guarantee scheme were the subject of default. The Government's breezy optimism at the launch of the scheme claimed that it was intended to be self-financing. It has, of course, consistently lost money because defaults outweigh the returns on the successful schemes. The Government may very well not care about that.
The reasoning behind the schemes were political and not economic. Boosting enterprise is a necessary political claim in a Conservative party, where there is also a marked reluctance to look at the realities that sit alongside those devices. It is nonsense to assume that every redundant shipyard worker can be converted into a small business man with £40 a week and a one-day induction course. To set 43 per cent. of applicants on the enterprise allowance scheme up for failure after three years is a cruel and unnecessary further blow to inflict on people, many of whom will already have been through the traumas of redundancy. The failure of new small businesses will bring further despair to their owners and their families. They may well also waste the financial compensation received in an earlier redundancy round. There is not much help to small businesses there, and there is no chance for such people to benefit from the enhanced thresholds in the corporation tax review that we are discussing.
If the Government really intended to help small businesses, they would have listened to the Labour party's Treasury team in the last Parliament, when we sought to amend the regulations covering the collection of VAT.
Many small businesses resent the amount of work that they put into collecting taxes for the Government. When businesses fail, the Inland Revenue and the Customs and Excise are almost always substantial creditors. It was not unreasonable for the Government to tighten up the collection regulations, so that debts to the public purse could not steadily accumulate. What was totally unreasonable and particularly unfair to small businesses was to deny a "good cause" defence to a business man who was in difficulties with VAT returns. Very small businesses will not be the beneficiaries of the corporation tax changes.
The sudden illness of the owner-manager of a small business can be a near-fatal blow to the prospects of the whole enterprise. In those circumstances it is wholly unreasonable for the Customs and Excise to harass the small business man when seeking its VAT payments. Indeed, it may be counter-productive. At a difficult time such pressures may force an otherwise viable business under. Clearly, a public interest defence of good cause could be advanced in those circumstances and I am amazed that a Government who claim to represent the small business community could not see that and legislate for it. It was left to the Labour party to advance such a proposition and the Conservative Government were left to reject it.
Those are the real burdens on small businesses and this measure is the real agenda for small business men. The small business community would like the issues of interest rates and skills shortages to be addressed by the Government in the Finance Bill and elsewhere. The Conservative party will, of course, try to claim credit for the Bill but I conclude, as I opened, by saying that there is substantially less to this than meets the eye.

Mr. Beith: The hon. Member for Newcastle upon Tyne, East (Mr. Brown) has just produced some strangely conflicting remarks. At one point he seemed to imply that the Government had conquered the problem of inflation. He sought to argue that the reason that it was not necessary to take into account the disappearance of stock relief, which was a feature of the Labour Government's changes for small businesses, was that that problem was designed to deal with inflation. I must advise the hon. Gentleman that inflation is rising and is now at a serious level. Indeed, that is the plain justification for the Government's interest rate policy. Therefore, the absence of that feature must be one of the factors that one considers when trying to decide whether it would be appropriate to give small companies a higher level of relief than the Government propose.
The hon. Gentleman then argued that the Government had got it about right because if one projects on a year-by-year index basis the position under the Labour Government, one arrives at almost the figure that the Government have proposed. If that is what he thinks, why did he not vote with the Government? It seems perfectly logical to vote with the Government and to support their proposition if one thinks that they have got it right, rather

than to skulk in the corner unable to vote either for or against the proposition that the relief should be considerably higher.
The hon. Member for Newcastle upon Tyne, East was right to say that the corporation tax relief is a benefit that will not deal with many of the problems of the smallest businesses and that at all levels of small business the problems of the level of interest rates and specifically that of VAT collection loom large. There is clearly a strong case for relieving some of the burden of corporation tax, which is why we support what the Government are doing in default of the larger measure of relief that we have just sought to persuade the Committee to accept.
I trust that having abstained in the previous Division the Labour party will not seek to oppose the inclusion of the clause in the Bill and that we can get on with these other matters when we reach the appropriate point.

Mr. Campbell-Savours: The amendment that the hon. Member for Berwick-upon-Tweed (Mr. Beith) moved on behalf of the Social and Liberal Democratic party was not supported by my hon. Friends, for a simple reason—and I shall tell him what was said as we went through the Lobby. It was because we sat through a Bill in Committee last year without Liberal participation in debates on these matters and because, while we voted on such matters, no Liberal Member voted with us that we could not take his amendment seriously.
If the hon. Gentleman thinks that he can come to the House on such an evening and move an amendment, having issued a press release, in the knowledge that in a previous year his hon. Friends refused to turn up and debate these matters at length, and if he thinks that at the same time, he can gather the credibility of the House of Commons, he is making a grave error of judgment. It may be that he had a very good case: I do not know. We did not consider it. It was not relevant. If he wishes to be taken seriously, he should ensure that his hon. Friends turn up to a Committee on the Finance Bill when we debate these matters again.
I turn briefly to stock relief and its effect on many small businesses during the period of the Labour Government. In many ways that was the largest concession ever given, under corporation tax law, by any Government that I can recall. The intention was to ensure that businesses were compensated for stock increases that arose from the inflation which existed during the period of the Labour Government and which derived from the oil price increases of 1974. However, most accountants, when drawing up accounts on these matters, did not take into account merely inflationary increases in stocks, but stock volumes.
During this period many companies were able to inflate their stock volumes to a major extent and yet, at the same time, claim relief on it. In my view, if the letter of the law had been strictly applied, those companies might have been subject to corporation tax during that period. Due to the complications of annual inventories and the difficulties of assessing the amount of stocks that companies were carrying, it was difficult for company accountants to assess what values could be attributed to inflationary factors, rather than stock volume increases.
Therefore, I submit that this major tax concession, which was introduced by the Labour Government, cost the Exchequer thousands of millions of pounds over that period. If I recall correctly, during that period a number of large companies in this country paid no corporation tax,


while they made healthy profits. They were able to hide behind the arrangements—some might say sloppy arrangements—that operated during the period of stock relief concession. I do not condemn them for that.

Mr. Hanley: It was very important.

Mr. Campbell-Savours: It was an important principle. I predict that if the Government do not deal with the problems of the balance of payments, they may find that they have to introduce another stock relief scheme to deal with the inflationary problems that will inevitably arise. We cannot continue as we are at the moment.
Some months ago, I asked the Chancellor a question at Question Time which, if I might say so modestly, was interesting. I asked whether it was fair to say that high penal interest rates were no more than a form of taxation paid to the private sector and private institutions. If a company pays high interest rates to what, in effect, is a private sector bank, it could be said that that is no more than a substitute for what in other conditions, perhaps of lower interest rates, might be a higher level of tax paid to the Exchequer in the form of corporation tax liability.
When we discuss interest rates, particularly as they affect the small business sector, we should remember that we are talking about taxation. Penal interest rates are nothing but taxes paid to private banks. If we see them in that context, the premium that we pay in higher interest rates, rather than more moderate and sensible rates, is a tax imposed by Government—possibly because of the inadequacy of their economic policy—and paid to the private sector and private institutions.
It is unreasonable of the Government not to concede this case. It is their economic policy and strategy that requires them to use interest rates as the weapon, in their view, to reduce the inflation level, and to deal with their other economic problems. In so far as it is a Government-inspired move to drive up interest rates to today's levels, they must take the responsibility, and accept and concede the principle that those high rates are no more than a form of taxation.
When those high interest rates, particularly their impact on small businesses, are taken into account when the lower rate of corporation tax and the raising of the profit limit thresholds are being considered, as they are this evening, the other burdens that have fallen on small businesses over the last few years should also be taken into account.
Another interesting factor that might be deemed a form of taxation is the large increase in commercial property rentals of the past two years. In the part of Lancashire in which I was once in business many years ago, one could regularly buy freehold square footage in the 1970s, for £1·50. The freehold price of a mill in Lancashire was rarely more than 75p a square foot. Today, even in the north, where there is still industrial recession, we pay £2 or £2·50 a square foot, not freehold but rental. Using the rental and the original capital cost multiplier, one can work out that the value of freehold industrial property in recent years has increased twenty to thirtyfold.
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In many ways, this has come about because there is not enough factory space on the market. If the Government built more factory space, through English Industrial Estates or similar organisations, or through local authorities, more commercial property would come on to the market, which would have a knock-on effect on the

costs of freehold acquisition and the rental prices of industrial and commercial property. But that is not happening. The scarcity of property is driving up rentals. This inflationary effect on property prices has been induced by the Government, and I submit that that is another form of taxation.
This taxation may be paid to private landlords, but it is a form of taxation because it derives directly from Government policy, which does not provide for the building of sufficient industrial work space. In many parts of the country—certainly in Lancashire and parts of Yorkshire—there is a dearth of industrial and commercial property and rentals are being driven up, even in my constituency. I can remember that, even as late as 1979, square footage in Workington was sold for as little as 50p freehold. Now, people looking for space in west Cumberland will pay £2 or £2·50 a square foot for annual rental—a massive increase.
Another factor to be taken into account in assessing the Government's tax regime for small businesses is the impact of the cuts in regional assistance. Regional support has been dramatically cut, so that in many parts of the country, of which my constituency is an example, a traditional capital-intensive industry such as Thamesboard Mills required such a large amount of Government money to set up its plant in Workington during a big expansion that a special Bill had to be passed to ensure that the company received its regional assistance, which exceeded the levels of grant that Ministers could sanction without such legislation.
We no longer attract this sort of industry. We no longer get the Leyland Nationals, the Ektona Fibres, the Thamesboard Mills and other large capital-intensive industries. They are no longer interested in Workington because we have nothing to offer by way of substantial regional assistance.
We are still an assisted area and we have development area status, but the level of assistance is substantially less than it used to be, and we are competing with other parts of the United Kingdom which have equally high levels of unemployment. In those areas are pools of unemployed and they are nearer to the great conurbations and market centres. In many ways they are winning against us in our bid to attract capital intensive industries.
The burden on small businesses in my constituency, including the cuts in regional assistance and the fact that they are paying higher interest rates and higher rentals for their properties, puts them at a considerable disadvantage. So the concessions on corporation tax which the Government have announced today for small businesses are small compared with the added burdens that those businesses have acquired in recent years.
Other cuts have applied to small businesses that would like to get into export markets to achieve growth, finding that they are hemmed in by saturation of the domestic market. Many small businesses used to use the British Overseas Trade Board as the vehicle for getting into foreign markets. I refer to businesses with perhaps half a dozen or a dozen employees, the very companies that are today in potentially expanding sectors. They have been clobbered, in effect, by the new rules under which the BOTB does not sponsor, in the way it did in the past, the small firms of which I speak.
I was sent to Tokyo, Japan, in 1973 on a trade exhibition, paid for by the Department of Trade, where we secured a number of new accounts for the manufacturers


with which I was involved. I also attended on a number of occasions the Milan trade exhibition and other such gatherings in various parts of Europe, always sponsored by the BOTB or by sectional bodies within the industry which, in turn, were sponsore on group stands. I am told that much of that has ended. I attended an exhibition in Birmingham a couple of months ago to talk to people in the trade that I was in originally, and they told me that the level of support now for people in our markets is minimal.

Mr. Hanley: If what the hon. Gentleman is saying is true, can he explain why more companies are now registered at Companies house than at any time in our history, allowing for the number of companies that have come off the register?

Mr. Campbell-Savours: That may not be too correct a measure; we may be talking of small incorporated businesses involving two or three people who, for whatever reason, have been advised by their accountants to seek incorporation. What matters is how much wealth we produce, how many people are employed, how secure one's markets are at home, whether one will be wiped by the cool breeze of recession and whether one can get into export markets.
Let us remember that export markets are a great plus for industry generally and certainly for smaller businesses. Such markets for small businesses often produce large orders. People who go abroad to sell do not want small orders; they want to do substantial business. Often in the 1970s I came across small business men whose major markets on the continent were store and wholesale groups and so on. It seems that much of that has gone because the contact point—the BOTB-sponsored exhibition—has, in effect, been lost from the support point of view, and many of those people no longer exhibit in overseas markets. That type of cost must be taken into account for businesses that want to enter those markets, and that cost must come into our evaluation of the real value of this concession for small businesses.
Historically, the tourist industry has been well supported by Government. We now learn that the Government have placed a moratorium on payments under one of the sections dealing with grants under tourist legislation with the effect that many projects are being put in jeopardy. Those that are will have their profitability affected by the loss of that grant. When we evaluate the worth of a concession in corporation tax, we cannot take it in isolation. We must see it in the context of all those factors and many others that I have not mentioned this evening.
My final point concerns the exchange rate and its effect on small businesses. I remember going to a trade exhibition in New York in 1980 to see some colleagues whom I had known when I was in business in the 1970s. We discussed the impact of the rise in sterling against the dollar on our ability to export to our overseas markets. One thing that rang out clearly throughout our conversations was that a high exchange rate was damaging Britain's exports.
Following that meeting, I met people from many companies which were severely damaged by the high exchange rate in 1980, 1981 and 1982 when sterling was so valuable. I am sure that I am not alone in that experience.

I am sure that if hon. Members are truthful, they will remember that period well. We lost markets then, and now the exchange rate is over-valued. Until a decision is taken to reduce the exchange rate and come down to something like $1·40 to the pound, the trade deficit will not be closed. A convoluted argument was produced last year that a high exchange rate could lead to a reduction in the trade deficit, but I never subscribed to that view, although it was interesting. I think that the Government have changed their position on that.
It is critical to close that trade deficit because that will provide the basis on which a real spark and some fire can be given to small business development in Britain. We need a way of ensuring that British manufacturers substitute for foreign imports. The only way that we can do that is by giving them some sort of competitive edge. That drop of 25 or 30 cents in the exchange rate will be critical in helping many companies to import substitute. That is what we have to do.
When the Paymaster General discusses those matters with his colleagues in the Treasury, he must realise that he cannot go on like this, when he has at his fingertips a weapon that he can use which within months, or certainly within a few years, could have an immeasurable effect on the opportunities and potential for small businesses.

Mr. Brooke: This has been an interesting and valuable debate, opened by the hon. Member for Newcastle upon Tyne, East (Mr. Brown) who began his speech by saying that the clause less than met the eye and concluded his speech with the same words. He also passed judgment on my right hon. Friend the Chancellor's use of the word "substantially". It was an agreeable metaphysical passage in his speech. The most metaphysical of all economic phenomena are invisible earnings.
This is a debate about small companies which have been highly visible. My hon. Friend the Member for Richmond and Barnes (Mr. Hanley) said that for the past eight years, and particularly for the past two or three years, there has been a notable and rapid expansion in the number of small companies that have entered business.
The hon. Member for Newcastle upon Tyne, East confirmed in his speech what I said in my speech on the amendment No. 14 and I shall now confirm that he was right. As the Bellman said in "The Hunting of the Snark", "What I tell you three times is true".
The hon. Gentleman asked why the Government had not changed these bands earlier. The reason was, as I said in my speech on the earlier amendment, that during the period to which he was referring we had been engaged in bringing the rate down. We brought the small companies rate down from 42 per cent. to 25 per cent. between 1979 and 1988.
The hon. Gentleman said that so far as the Labour party was concerned the rates were now about right. I think he probably meant the bands. We follow with the keenest interest anything that the Labour party says about rates because we notice a certain reticence about indicating precisely at what level various rates will strike. I am greatly reassured to hear that the hon. Gentleman thinks in this instance that the rates are about right.

Mr. Nicholas Brown: I referred to the rates at which the bands are set.

Mr. Brooke: At any rate, I have sought to give the hon. Gentleman a response to what he said.
He went on to talk about interest rates and the hon. Member for Workington (Mr. Campbell-Savours) also addressed that subject. We all come here with the various impedimenta of our experience. I always enjoy listening to the hon. Member for Workington—and I hope he will forgive me for saying so—talking about his experience in the private sector before he entered the House. I ran a business for 18 years before coming into the House and I think that those of us who run businesses of the sort of size that I did and, I suspect, the hon. Gentleman did are accustomed to aspects of the business cycle and to living through them. I certainly can remember living through the difficulties of the mid-1960s and the mid-1970s. I would have lived through the difficulties of the recession of 1969–71 if I had not been in New York, where the Wall Street Journal somewhat surprised me by being sufficiently frivolous as to say that the recession had become so serious that the Mafia had had to lay off two judges in New Jersey.
The important thing for anybody running a small business is a sense of steadiness in the economic framework within which he is asked to operate, and that is something which the Government have sought to provide.

Mr. Ted Rowlands: May I ask the right hon. Gentleman one simple question? How does he justify a stituation in which interest rates are virtually double the rate of inflation?

Mr. Brooke: I think the hon. Gentleman is familiar with the relationship between the mortgage interest rate and the RPI in this country, which only applies elsewhere in Ireland and Canada.

Mr. Rowlands: That was not my question.

Mr. Brooke: The hon. Gentleman asked me about the inflation rate and I was saying that, since the interest rate and the mortgage interest rate, which flows from it, are part of the RPI, necessarily when inflation is rising it provides an upward stimulus and when it is falling it provides a very strong downward stimulus.

Mr. Rowlands: I did not say anything about the mortgage rate. I asked a simple question. Why should interest rates be nearly double the rate of inflation?

Mr. Brooke: I genuinely misunderstood the hon. Gentleman's question. I think he is taking us slightly wide of the clause; I shall watch you, Sir Paul, out of the corner of my eye. If the hon. Gentleman will refer to a table in a relatively recent copy of the Bank of England Quarterly Bulletin he will see the real interest rates in the United Kingdom, Japan and Germany and their relationship to the movements in wages and unit labour costs. The real rate of interest in this country being an offset to the fact that unit labour costs have been rising faster, one sees from the chart a rate which is comparable in the three places.

Mr. Campbell-Savours: Is not the real reason the fact that the Chancellor wants all this hot money in London to pay for the trade deficit? Why does not the right hon. Gentleman be honest with the House?

The First Deputy Chairman: Order. This debate is new getting rather wide. We must stick to the clause which we are discussing.

Mr. Brooke: In the spirit of the question which the hon. Member for Workington asked, he knows that, because the balancing item is now larger than the deficit, it is difficult to know whether it is British exports which are being understated and what precisely is the nature of the capital inflow. I agree that we would be able to have a more interesting debate if we had precision on those figures.
The hon. Member for Workington made reference to stock relief and went through an analysis in relation to inflation. I will not go into a discussion with him as to what caused inflation during that period but I can echo some of the things that he said about stock relief. In the 1980s, that provision became much less important as we reduced the rate of inflation, and it was abolished in 1984 as part of a package of measures enabling the rate of corporation tax to be reduced. Both the main and small companies rates are much lower than when we came to office.
The hon. Gentleman referred to rentals for industrial space in his part of the country. I am delighted that on the basis of his analysis the demand for industrial space to which he also referred seems likely to increase the amount of space available. There was the slightest constituency dimension to the hon. Gentleman's speech, and, as to his comments on development areas, it is the case that, in the first 10 days after I was born my father anonymously contributed three articles to The Times on the subject of County Durham that all the historians of the 1930s say were responsible for the creation of development areas. My father is now dead, and although he was sympathetic and a stimulus to the concept of development areas in the 1930s, I am certain that he would be delighted that the manner in which the market is operating is causing the enterprise culture to flourish in all parts of the country.
The hon. Gentleman's concluding remarks concerned the exchange rate. 1 was the financial correspondent for the Financial Times in Switzerland at a time when there were 12 deutschmarks to the pound and 12 Swiss francs to the pound. The remarkable achievement of Switzerland and Germany has been to run balance of payments surpluses over the ensuing nearly 30 years while enjoying a steady increase in the value of their currencies. In the early 1980s—the very period to which the hon. Gentleman referred—there was a swing of 2·8 per cent. in terms of Japan's trade position as a percentage of gross domestic product at a time when it had an appreciating currency.
In the first quarter of this year, export volumes increased by 6·5 per cent. by comparison with the last quarter of 1988, at a time when import volumes increased by only 3·5 per cent. That is clear evidence that the reduction in demand for imports is improving our trading position.
We have strayed some way from the terms of clause 33. The hon. Member for Newcastle upon Tyne, East sought to suggest that there was less to clause 33 than meets the eye. I am certain that the small business men, seeing that the bands have changed, will regard it as a very worthwhile clause, and I commend it to the Committee.

Question put and agreed to.

Clause 32

CHARGE AND RATE OF CORPORATION TAX FOR FINANCIAL YEAR 1989

Question proposed, That the clause stand part of the Bill.

Mr. Rowlands: If we accept clause 32, we shall be accepting a uniform corporate rate for all companies. I take this opportunity to debate the situation affecting not the smaller firms that were the subject of clause 33 but mature manufacturing sector companies of medium to large size.
I wonder whether the Government have noticed what is beginning to happen among such companies, particularly those in the consumer durable and white goods sectors, which still account for a significant number of jobs and for an important part of the country's ecomomy. I therefore question whether we should automatically endorse rates of 35 per cent. for all companies, irrespective of their current situation.
I represent a community in which the only manufacturing base we have left is what I call the mature manufacturing sector, which is in consumer durables, selling to a replacement market rather than one for innovative products. They are seeking to encourage consumers to replace washing machines and so on—the consumer durable white goods. As a result of this they are finding increasing difficulty in making such sales.
One of the major problems has been the increase in interest rates, which has led to a reduction in consumer power and therefore an increasing problem of growing stocks in this manufacturing sector. I raise this because I have a horrible feeling that we are about to enter another phase in which, for the Chancellor's policy to work, a number of our people will be put out of work. We went through it in the early eighties, and we were told we were over it by the Government, but now again we are seeing the terrible tell-tale signs. As a result of high interest rates and the dampening down of consumption, which I understand is the Government's case for high interest rates, the biggest impact will be not upon the imported manufacturing sector but on the domestic mature manufacturing sector. Sales in a whole area of our existing manufacturing sector will be affected by high interest rates.
The Treasury never understands what happens to the economy. It runs this system, but never looks closely at what happens in micro terms as a result of general, broad economic policy and use of fiscal instruments. For example, high interest rates are a blunt instrument which affects everybody and everything. In the communities I represent, in the industries I know most about because my constituents are still employed in them, stocks are rising, sales are falling and we are beginning to worry about whether we shall have redundancies once again in this sector.
I do not know what the answer is. Should there be a differential rate of interest for the manufacturing sector? Apparently not. So I raise the question whether there should be a differential rate of corporation tax. My right hon. Friend the Member for Llanelli (Mr. Davies) put down an amendment, which was not accepted for an understandable reason, to introduce such a differential. I ask the Minister whether he is happy with the fact that in this mature manufacturing sector there will be problems with employment. Will we go through a new phase of

redundancies? Will we yet again find ourselves being put out of work? On the other hand, does he think the economy will grow and we can see ourselves through this?
I am not happy, and I therefore seek the opportunity on this clause to arouse the interest of the Government in this problem. Please will the Minister tell me whether he believes that as a result of high interest rates we shall be out of work, as we were in the early eighties?

Mr. Brooke: I am delighted to respond to the hon. Gentleman the Member for Merthyr Tydfil and Rhymney (Mr. Rowlands). At the risk of extending my family references, my grandfather grew up in Rhymney as the son of the secretary of the iron works, and I am delighted to have this link with the hon. Member. He addressed the set-off between inflation and interest rates, and posed various questions about what the future might hold for us and probed whether the Government understood what was happening. Of course the Government understand the effect of a period of high interest rates on the economy and the level of demand, and the impact of that on manufacturers in the hon. Gentleman's constituency. Without question, however, we regard inflation as a much more serious problem and one that must be defeated and cured. A period of high interest rates is, in our view, a sensible instrument to use to achieve that objective.
Since 1979—I am now addressing myself to the hon. Gentleman's query on behalf of his right hon. Friend the Member for Llanelli (Mr. Davies) about whether there should be a differential rate of corporation tax for the manufacturing side—there has been a major turnaround in the fortunes of manufacturing industries, which are now in a far stronger position than they have been for many years. Output has reached record levels. In 1988 alone it grew by 7 per cent., and the latest figures show that that growth is continuing. In the three months to February, output was 7·5 per cent. higher than it was in the same period last year. The pattern has been observable over a significant period; over the past two years annual growth has consistently exceeded 5 per cent. We have not experienced such developments for a long time.

Mr. Rowlands: The Minister has drawn from his historic and family experience of our communities. May I bring him up to date? The area that I represent—along with other parts of the Principality and the rest of the country—has experienced threatened redundancies, shorter working weeks and rising stocks in consumer durables. Will the Minister answer a simple question? Dos he believe that for the Chancellor's policy to work more of our people must be put out of work?

Mr. Brooke: It is certainly not my right hon. Friend's purpose that people should be put out of work; it is his purpose, however, that the level of demand in the economy should be somewhat reduced to achieve the beneficial effect on inflation that we seek. The hon. Gentleman cannot press me to make a specific forecast about what will happen in Merthyr Tydfil, which—in a pluralist system—will, by definition, depend on the companies involved. But there is no doubt that, first, manufacturing industry has been doing extremely well in the recent past, and, secondly, the Government see no reason for the differential rate of tax that the hon. Gentleman seemed, by implication, partly to suggest.

Mr. Rowlands: The Minister winds his words around. I do not ask him to make a forecast; I simply ask him to confirm or deny that the potential consequence of high interest rates in a mature manufacturing sector is more people out of work. The Minister says that he wants to dampen down consumption; one of the effects of that is increased unemployment. Does he agree with that proposition?

Mr. Brooke: The hon. Gentleman is talking about a highly complex interlocking set of equations.

Mr. Rowlands: Those are just words.

Mr. Brooke: The hon. Gentleman can say that they are only words, but the fact remains that what happens to wage rates in such circumstances directly affects what will happen in his constituency. I would find it difficult to make such a forecast.
What the Chancellor is seeking to do is bring the economy back to a state of equilibrium in which there is no excess demand, inflation can be wrung out of the economy and we can revert to the steady growth that the country has seen over the past seven or eight years—growth that it has rarely known before in its history.

Question put and agreed to.

Clause 33 ordered to stand part of the Bill.

To report progress and ask leave to sit again.—[Mr. Heathcoat-Amory.]

Committee report progress; to sit again tomorrow.

Rose Theatre, Southwark

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Heathcoat-Amory.]

Mr. Simon Hughes: It was a great pleasure to hear on Thursday last that Mr. Speaker had selected for this evening the opportunity for me to raise the matter of the preservation of the Rose theatre in Southwark. I am very grateful to him for that.
When one is but the latest of a series of Members of Parliament for a constituency, the first of whom took his seat in 1295, one can reflect without too much need for research on some words appropriate for tonight:
All the world's a stage,
And all the men and women merely players:
They have their exits, and their entrances".
We are here but briefly as politicians. The unusual privilege of being a politician normally allows one to make specific pleas for one's constituents; it rarely allows one to make pleas that also go far beyond the interests of one's constituents on a matter of national and international importance, or to make pleas for something of enormous historical importance. But that is what I can do this evening.
I want to do two simple things. First, on behalf of my constituents and many others in this country and beyond, I come to Parliament, to the centre of the modern, national political stage, to make a plea that the recently discovered ruins of the Rose theatre in Southwark be preserved from today henceforth for all the world to enjoy.
I come with a second plea specifically for the Government. I seek nothing more and nothing less than a simple declaration that the Government be willing to say today or, at the latest, later this week, that they are of the view that the Rose theatre should be preserved for all to see and that they will work actively to secure that.
It may sometimes be thought that modern constituents in an inner-city working community do not think that ruins are of great importance. In fact, our local newspaper last year did a vox pop and discovered exactly the opposite. The people of Southwark and Bermondsey said that they overwhelmingly supported the preservation of our history and our heritage.
The Minister will know that it was less than a year ago that I raised with her predecessor in the House the question of the archaeological heritage of Southwark, an enormously rich area of archaeological interest because of its ancient geographical importance, being at the crossing point into London from the continent and elsewhere. More recently, on 21 February this year, my hon. Friend the Member for Caithness and Sutherland (Mr. Maclennan) asked the Secretary of State
what representations he has received from English Heritage concerning the archaeological discovery of the Elizabethan Rose theatre in Southwark.
The Minister replied:
None so far."—[Official Report, 21 February 1989; Vol. 147, c. 572.]
I know for a fact that since then letters have been pouring into her Department with increasing rapidity and authority.
Things have moved on, because the excavation of the Rose theatre has revealed that we have discovered a treasure indeed. Over the last few weeks, it has become clear that the ruins of one of the great Elizabethan theatres


of Bankside—one directly linked with Shakespeare and lost to sight over 350 years ago—can now be seen and enjoyed at Bankside, by the Thames by Southwark bridge.
But next week, the foundations of the theatre are likely to be covered up and damaged substantially. They were discovered on land belonging to Imry Merchant Developers. I can say without equivocation that to date Imry, the landowner, has acted with absolute propriety and worked with English Heritage and the Museum of London to secure an opportunity for archaeologists to explore the theatre and to reveal the treasure that exists. I am grateful to the company, as I have said to the director in charge of the site, and I here repeat my thanks. But now we must go further. If the site is covered up at the beginning of next week, we shall lose a site of unique importance and an opportunity for all time.
The site is one of only eight theatres in London in the 16th century, four of which were on the south bank. The sites of the Hope and the Swan are likely to have been destroyed by commercial office developments. The site of the Globe has not been excavated and we do not know what, if anything, we shall find. We have excavated the site of the Rose as we have found it. Therefore we have found the first, and as far as we can be sure the only, in situ evidence of one of the Elizabethan theatres. No one knows whether we shall find any more, but we have found the site of the Rose; it is unique and it may be all we possess of the physical structure of the great public theatres of London 400 years ago. Those theatres were unique to London from the mid-17th century.
The Rose was built in 1587 by Philip Henslow, the impresario, and his partner, Edward Alleyn. It is the earliest of the four Shakespearean theatres. It saw Marlowe's plays performed—it saw "Dr. Faustus" and "The Jew of Malta"—and Jonson, Dekker, Webster and Shakespeare himself performed there too. "Henry VI" and "Titus Andronicus" were probably performed by Shakespeare himself on the stage that we can see now. I found it timely indeed that last Saturday I enjoyed a performance of "Henry VI" by the Royal Shakespeare Company at the Barbican, only a mile away from the original venue of that play. The last known performance at the Rose was in 1603. Soon afterwards, the theatre was demolished and covered up, although happily this theatre is one of the theatres where we know all that was put on and the only one of which we have an illustration contemporay to Shakespeare's plays.
As a result of the dig, we have discovered an enormous amount about the Elizabethan theatre that we did not know but had only speculated about. Previous evidence was contradictory We had to hypothesise as to what the theatre looked like and how it worked. Now we can see it for ourselves. Today in The Times there is an illustration by C. Walter Hodges of what the Rose must have looked like, based on the now available information. It shows the polygonal inner and outer walls of the galleries, the sloping mortar floor, the foundation of the stage and the towered tiring house behind. The heritage of Southwark, England and the world has now accurately been discovered on Bankside not far from here.
I have received many letters and expressions of interest in recent days. One letter from a student at King's college, London, asks:

Is not the site of the Rose theatre on a par with that of the Tower of Westminster Abbey? Many foreign visitors surely find their strongest association with England through her great writers and few sights could hold more attractive power than one associated with Shakespeare. Thousands go to Stratford".
On Bankside we have the real thing. This week we have the opportunity to decide how we make sure that the excitement which I, like others, have enjoyed, is shared by people in years to come.
Another letter to me said:
The discovery of the Rose theatre in Southwark provides one of the most important pieces of hard evidence on the nature of the Elizabethan theatre ever to have been found. Although it lies in the earth and rises but a few feet, it is a national monument to rank with Stonehenge.
On many occasions—by letter, parliamentary question and Adjournment debate—I have asked the Secretary of State to schedule the Rose and Globe theatres. I am aware of the procedure for scheduling and for designating areas as areas of archaeological importance. I first ask therefore that a decision be made this week to schedule the site of the Rose theatre and to designate north Southwark, contemplated as a possible area for such designation, as a sixth AAI. I hope that the Government will say that they are willing to consider that and I have today tabled a question to the Secretary of State asking specifically about scheduling.
I want to go further and to explore the ways forward, in the belief that they can be achieved. Given that the developers have so far been sympathetic and given that they now realise how amazing the discovery is, a breathing space is needed for them, the planners in Southwark and English Heritage, with Government support, to work out a way whereby the building that the developers want can be built in a modified form and yet the Rose can be preserved.
On an adjacent site, the actor, director and great friend of Shakespeare, Sam Wanamaker, is constructing a replica of the Globe. It would be a supreme dramatic irony if an American were to be recreating a model of our heritage while we were burying the original Rose theatre itself next door. We cannot allow that to happen.
The remains of the Rose should and must be preserved and presented for the public to view as a monument capable of interpretation. Given the will, the time, the money and the imagination, it must be possible to find a way of keeping the remains visible to future generations. All options should be considered, but the important precondition is that the site is not filled in and that piles are not driven through the foundations, as proposed for next week.
Reconstruction of the site elsewhere is not an option. That would not be authentic. Relocation is not an option, because it would not be the same as the original site. Covering the theatre up and opening it up again later is not an option, because even that would have risks to the site and some of the remains would be destroyed. The vibration of vehicles, the weight of vehicles and power-driving machines would cause additional destruction, apart from the immediate destruction caused by building work. However careful people are, covering in and opening up the remains would not be good enough.
Sam Wanamaker's proposal—although in the right direction—that the site could be viewed only through glass—whether light or darkly—is not sufficient. The Colosseum in Rome is enjoyable because one is in the


place. Stonehenge is right and important because it is as it was. Fishbourne is right because one can go in and walk around. We must be able to do the same with the Rose.
Many people have written to me expressing their support. John Earl, the director of the Theatres Trust, a body set up by Parliament to promote the better protection of theatres, says:
It is of vital importance that the preservation and proper display of the Rose should be achieved to the highest international standards".
He goes on to comment that linking it to a possible development next door is not secure enough. The archaeologists on site make it clear that it must be preserved in a way that can be appreciated. It would be ludicrous for us to seek to achieve a lesser objective.
My colleague the hon. Member for Dulwich (Mr. Bowden) wanted to be here tonight and expressly sends support, as does my colleague the hon. Member for Peckham (Ms. Harman). Three parties are represented in the Southwark borough's three Members of Parliament and they are supported by the local authority, the Archbishop of Canterbury, the Archbishop of Southwark, the Bishop of Southwark and many from the theatre world —performers, managers, historians and many besides.
Many messages have come in from Britain and overseas. The most pre-eminent people in British theatre today feel that the Rose is so important that not only do they visit it; they want to make it clear that it must be preserved. I hope that I am not exaggerating when I say that the importance of the preservation of the Rose cannot be overestimated. It is a miracle that it has been found, and it must now be kept to be enjoyed.
The Secretary of State and, I understand, the Prime Minister have now been alerted to the importance of the site. I hope that the Minister will tell us tonight that the Government are willing to say that the work done so far is good but that, now we have discovered the treasure under the earth, we must ensure that it is preserved.
It is no good saying, "It is just another site and we cannot preserve them all." I was not here last Friday for the Adjournment debate about the Huggin hill palace in the City of London, although I have read the report of it in Hansard. The Minister made it clear that there were other Roman baths and that we might have to lose one. We cannot say that about the Rose. There is no other example of this part of our heritage in the country. It is unique, and must be recognised as such.
I shall end by quoting from others who have written in support of the case before us, but first let me sound a note of warning. It is not enough that we should continue to react at the last moment to each important find or to try at the eleventh hour to intervene in negotiations that have cliffhanger qualities. We should reform our planning structures so that, in future, we can protect sites in advance.
The Minister knows that this is not a one-off expression of interest on my part. I hope that she will see my bid tonight as part of my concern that we should not only increase the number of ancient monuments that we schedule and protect, increase the number of areas of archaeological importance that we designate and the financial wherewithal given for the work to be done, but we should ensure that local authorities protect archaeology and structure plans, that the Department's structure plan is made much more specific in its guidance and that the environmental impact assessment measure agreed last

year are specifically made to apply to the buried historic environment. We must do more, or we shall lose other sites, as valuable as the Rose but in different ways.
The conclusions of those who have visited the Rose are that we are confronted by our first sight of a playhouse that Shakespeare knew. My last quotation is from someone who wrote to me:
It is all we have ever seen of the most important group of theatres in the history of Western civilisation and our first glimpse of the place where English drama reached its finest flowering. If we do not keep it the world will rightly judge us to be barbaric.
We have an historic responsibility and I hope that, in partnership with all concerned, we shall discharge it this week with honour.

The Parliamentary Under-Secretary of State for the Environment (Mrs. Virginia Bottomley): The hon. Gentleman said that this was not a one-off interest for him. I endorse that remark. He has raised questions of archaeological concern, particularly relating to his constituency, on several occasions—in questions, in letters and in the debate to which he referred, which took place shortly before I took over my present responsibilities.
I have much sympathy with the hon. Gentleman because I spent many years as a social worker in his part of Southwark. It is well known that helping people to have a sense of pride in the history of their community can play a very important part. I worked on the north Peckham estate, which is an estate where a sense of identity and an understanding of the past cannot be said to be the overriding preoccupation of its residents, so I can well understand the hon. Gentleman's wish for people to know and to understand the past of Southwark and to find ways to ensure that archaeological remains can be preserved and shared with others.
The hon. Gentleman also referred to the debate last Friday which concerned the impressive archaeological remains at Huggin hill in the City. I am grateful to the hon. Gentleman for giving me another opportunity to discuss archaeology. I have been waiting for some months in my present role for such matters to be discussed on the Floor of the House because they are of growing interest and concern. As development grows and as the whole profession of archaeology strengthens, new techniques and new ways of understanding become available. At the museum of London, which played an important part at the Rose theatre, there are no fewer than 400 archaeologists over the year who participate in digs in London.
The remains at Huggin hill, ascribed by some as those of the palace of Julius Agricola, the governor of Britain—although there is some argument about that—are indeed impressive. I can inform the hon. Gentleman that we are keeping in close contact with all the parties there, and we are continuing to press for a satisfactory outcome for all concerned.
Equally exciting are the discoveries to which the hon. Gentleman has referred. Those excavations have been established to the satisfaction both of the museum of London and of the scholars of the Elizabethan and Jacobean theatre as the site of the Rose theatre, which, as the hon. Gentleman said, in its heyday saw performances of most of Christopher Marlowe's plays, with Edward


Alleyn—that famous actor of his day and later founder of Dulwich college—playing the title role of Dr. Faustus and the Jew of Malta.
Perhaps of even greater excitement, certainly for Shakespeare scholars and enthusiasts all over the world, will be the fact that two of Shakespeare's early plays received their first performance there—Henry VI in 1592, in which some believe—the hon. Gentleman would count himself among them—Shakespeare appeared as a young actor, and also Titus Andronicus. For the first time we have clear evidence of the shape, size and layout of an Elizabethan theatre, which is crucial to the understanding of the production of the Elizabethan plays that have given so much to our culteral heritage of drama and theatre.
The excitement of this discovery—and for some the surprise—has led to an understandable wish for its preservation, especially because, as we know, such remains are irreplaceable. There are real practical and philosophical debates about the best way forward. How do we safeguard the best of our heritage in a manner consistent with the needs of a dynamic society? How do we also move towards the future? Some of those issues were discussed in our debate last week. I made it clear to the House then that we have seen very dramatic improvements in the relationship between developers and archaeologists.
In a controversial case in York concerning the palace of the Emperor Septimus Severus, there was speculation about how that could be preserved. As a result of good will and co-operation between the archaeologists and the developers, the developers have agreed to redesign the foundations to preserve the archaeology.
Much of that good will and co-operation stems directly from a very valuable code of practice produced by the Standing Conference of Archaeological Unit Managers and the British Property Federation. That partnership has resulted not only in co-operation, but in hard resources. While English Heritage has recently estimated that last year it made a contribution of about £7 million to archaeology, a further £14 million was contributed by developers for excavation. That reinforces the view that voluntary co-operation and partnership are working well in many cases.
As the hon. Gentleman said, the Rose theatre is not a scheduled ancient monument. Many will feel it essential for the protection of those remains, that they be scheduled. Indeed, only last week we received a request to this effect from the museum of London. Scheduling means that consent must be sought from the Secretary of State before any works that would disturb the monument may be carried out. However, it does not automatically mean that the site must be preserved for all time.
In considering the merits of any scheduling proposal, such as that put forward, it is necessary to bear in mind the fact that planning permission for the redevelopment of the site has previously been granted by the London borough of Southwark and that construction is indeed under way on another part of the site which is separate from the remains of the Rose theatre. It must also be appreciated that adequate time for excavation of the site

has already been negotiated between the museum of London and the developers, Imry Merchant Developers plc.
I was pleased to hear the hon. Gentleman pay tribute to the developers because I understand that the work has been carried out throughout in accordance with an agreement drawn up and fully adhered to by both sides. I know too that English Heritage, our agent in this area, has been keeping an informal watching brief on the site and that Imry Merchant has consistently respected its requirements. I have no hesitation in commending the developer's allocation of time, funds and equipment, which resulted in this dramatic discovery in the first place and which has allowed for the subsequent excavation of the site.
I am conscious also that Imry Merchant Developers plc is currently studying seriously the imaginative concept which hon. Members may have seen referred to in newspaper articles recently. The hon. Gentleman referred to Sam Wanamaker's idea for a below-ground Shakespeare museum, which would be linked by tunnel to the Rose site, emerging in an area from which the Rose remains could be viewed, at some time in the future.
I understand that Imry has evaluated this general concept so far as has been possible in the short time available, and that it is prepared to do whatever can be done in conformity with its general aims and objectives. It has indicated that the existing scheme could be modified so that it is compatible with such a scheme as has been put forward by Sam Wanamaker. This would involve the encapsulation of the site, and the covering of the remains, so that the filling could be dug out again at a later date and the remains seen from a viewing platform. I understand that this may not be sufficient to satisfy the hon. Gentleman, but it has been endorsed by English Heritage.
I stress that is remains to be seen whether it will prove possible to put the plan into effect. I am, however, encouraged that Imry is living up to its track record for responsible reaction to new situations. Its actions once again prove how seriously so many developers rightly take their responsibilities towards the archaeological heritage. However, I stress that, regardless of whether the Sam Wanamaker scheme comes to fruition, the remains of the Rose theatre site will be preserved for future generations beneath the new development.
In terms of extending our knowledge of Elizabethan theatre, the Rose project has already been a remarkable success. The information gathered from the excavations has amply demonstrated that. The remains will be substantially preserved beneath the new building. Although we can do nothing to mitigate the damage that has already been done by the piling from previous office blocks, any further damage to be caused by the new building is minimal.
That brings me to the question of designation under part II of the Ancient Monuments and Archaeological Areas Act 1979. We have discussed that matter previously. As I have said, English Heritage has recently consulted local authorities and a number of other bodies about the working of the system and about whether further designation would be desirable. We have received its advice and are considering it carefully and I shall consider the hon. Gentleman's remarks in that context.
I should like to congratulate the developers and the archaeologists on their splendid job. Like the hon. Gentleman, I hope that a way will be found to ensure that future generations are able to see this magnificent

discovery and I commit myself to working with all the parties to find an effective outcome that will achieve the goal that we are all pursuing.
Question put and agreed to.
Adjourned accordingly at nineteen minutes past Twelve o'clock.